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Economic Monitor – Weekly Commentary
by Eugenio Alemán

Real-time indicators support a rate cut in October

October 17, 2025

Chief Economist Eugenio J. Alemán discusses current economic conditions.

This week’s scheduled release of the Consumer Price Index (CPI) for September was postponed due to the ongoing federal government shutdown, which has disrupted the operations of key agencies like the Bureau of Labor Statistics (BLS). However, to meet statutory deadlines in calculating the Social Security’s annual cost-of-living adjustment (COLA), the Department of Labor has recalled select staff to process the September CPI data. The report is now expected to be released on October 24.

While this ensures the availability of inflation data for critical policy and benefit decisions, the broader shutdown continues to hinder the collection and publication of other economic indicators, including employment and retail sales. This data vacuum introduces a layer of uncertainty for policymakers, market participants and analysts who rely on timely government statistics to assess the health of the economy.

Looking ahead, we caution that October’s CPI may come in “light” because when it is finally released, it may face revisions as the shutdown has not only delayed data processing but also interrupted real-time data collection. It is also possible that the BLS will keep a reduced workforce going forward and until the shutdown is over, to continue to survey and process inflation numbers, because if they don’t do it during the periods of the month when they are supposed to be done, the accuracy and reliability of inflation data will be at risk.

Despite the delay, our expectation is for a modest uptick in inflation. Real-time indicators support our view as the ISM Manufacturing and Services Price subindices have shown upward pressure, suggesting firms are facing higher input costs. The NFIB Small Business Optimism Survey indicates a growing share of businesses plan to raise prices in the near term and anecdotal evidence from the regional Fed Surveys also points to tariff-driven pricing pressures.

When examining the same alternative sources as mentioned above, findings suggest that the labor market is cooling meaningfully, but not crumbling. In fact, the ISM Services Employment Index remained in contraction territory for the fourth consecutive month, while the ISM Manufacturing Employment Index has been in contraction since February. Similarly, while the NFIB Small Business Jobs Report showed an increase in hiring plans in September, unfilled job openings fell to the lowest level since July 2020. At the same time, the cooling of the labor market has not shown so far in the initial claims number. Perhaps the biggest risk of the lack of employment data during the last quarter of the year is related with federal government workers, who dropped out at the end of the fiscal year on September 30 and could have made the October nonfarm employment number negative.

This softening in employment conditions is one of the reasons we believe the Federal Reserve is likely to cut rates at its October 28–29 meeting and Chair Jerome Powell’s reinforced our view at his speech at the National Association of Business Economists (NABE) conference earlier this week:

“The outlook for employment and inflation does not appear to have changed much since our September meeting… but downside risks to employment have increased.”

Jerome Powell – Federal Reserve Chairman

Powell also signaled that the Fed’s quantitative tightening program may be nearing its end, citing signs of tightening liquidity and a desire to maintain “ample reserves” in the banking system. While he stopped short of offering explicit rate guidance, the tone of his remarks suggests a dovish pivot is underway. In our view, the Fed is increasingly focused on supporting the labor market, especially as inflation risks appear transitory and tariff-driven. The October CPI may show a tick higher, but it’s unlikely to derail the Fed’s easing journey.

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Economic and market conditions are subject to change.

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Consumer Price Index is a measure of inflation compiled by the US Bureau of Labor Statistics. Currencies investing is generally considered speculative because of the significant potential for investment loss. Their markets are likely to be volatile and there may be sharp price fluctuations even during periods when prices overall are rising.

Consumer Sentiment is a consumer confidence index published monthly by the University of Michigan. The index is normalized to have a value of 100 in the first quarter of 1966. Each month at least 500 telephone interviews are conducted of a contiguous United States sample.

Personal Consumption Expenditures Price Index (PCE): The PCE is a measure of the prices that people living in the United States, or those buying on their behalf, pay for goods and services. The change in the PCE price index is known for capturing inflation (or deflation) across a wide range of consumer expenses and reflecting changes in consumer behavior.

The Consumer Confidence Index (CCI) is a survey, administered by The Conference Board, that measures how optimistic or pessimistic consumers are regarding their expected financial situation. A value above 100 signals a boost in the consumers’ confidence towards the future economic situation, as a consequence of which they are less prone to save, and more inclined to consume. The opposite applies to values under 100.

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GDP Price Index: A measure of inflation in the prices of goods and services produced in the United States. The gross domestic product price index includes the prices of U.S. goods and services exported to other countries. The prices that Americans pay for imports aren't part of this index.

Employment cost Index: The Employment Cost Index (ECI) measures the change in the hourly labor cost to employers over time. The ECI uses a fixed “basket” of labor to produce a pure cost change, free from the effects of workers moving between occupations and industries and includes both the cost of wages and salaries and the cost of benefits.

US Dollar Index: The US Dollar Index is an index of the value of the United States dollar relative to a basket of foreign currencies, often referred to as a basket of U.S. trade partners' currencies. The Index goes up when the U.S. dollar gains "strength" when compared to other currencies.

The FHFA HPI is a broad measure of the movement of single-family house prices. The FHFA HPI is a weighted, repeat- sales index, meaning that it measures average price changes in repeat sales or refinancings on the same properties.

Import Price Index: The import price index measure price changes in goods or services purchased from abroad by U.S. residents (imports) and sold to foreign buyers (exports). The indexes are updated once a month by the Bureau of Labor Statistics (BLS) International Price Program (IPP).

ISM Services PMI Index: The Institute of Supply Management (ISM) Non-Manufacturing Purchasing Managers' Index (PMI) (also known as the ISM Services PMI) report on Business, a composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector.

The ISM Manufacturing Index: The GDP Now Institute of Supply Management (ISM) Manufacturing Measures the health of the manufacturing sector by surveying purchasing managers at manufacturing firms. The survey asks about current business conditions and expectations for the future, including new orders, inventories, employment, and deliveries.

Consumer Price Index (CPI) A consumer price index is a price index, the price of a weighted average market basket of consumer goods and services purchased by households.

Producer Price Index: A producer price index (PPI) is a price index that measures the average changes in prices received by domestic producers for their output.

Industrial production: Industrial production is a measure of output of the industrial sector of the economy. The industrial sector includes manufacturing, mining, and utilities. Although these sectors contribute only a small portion of gross domestic product, they are highly sensitive to interest rates and consumer demand.

The NAHB/Wells Fargo Housing Opportunity Index (HOI) for a given area is defined as the share of homes sold in that area that would have been affordable to a family earning the local median income, based on standard mortgage underwriting criteria.

Conference Board Coincident Economic Index: The Composite Index of Coincident Indicators is an index published by the Conference Board that provides a broad-based measurement of current economic conditions, helping economists, investors, and public policymakers to determine which phase of the business cycle the economy is currently experiencing.

Conference Board Lagging Economic Index: The Composite Index of Lagging Indicators is an index published monthly by the Conference Board, used to confirm and assess the direction of the economy's movements over recent months.

New Export Index: The PMI New export orders index allows us to track international demand for a country's goods and services on a timely, monthly, basis.

Gold is subject to the special risks associated with investing in precious metals, including but not limited to: price may be subject to wide fluctuation; the market is relatively limited; the sources are concentrated in countries that have the potential for instability; and the market is unregulated.

The Conference Board Leading Economic Index: Intended to forecast future economic activity, it is calculated from the values of ten key variables.

Source: FactSet, data as of 10/17/2025