Fed Rate Decision Hinges on Inflation Data Precision

The Federal Reserve's decision on whether to raise interest rates is uncertain due to the proximity of two upcoming inflation reports, which will be released this week. The Labor Department will release the August Producer Price Index tomorrow and the Consumer Price Index on Friday.

Analysts believe that if the month-over-month core PCE inflation number is 0.2% or lower, it would suggest that inflation is falling toward the Fed's target of 2%. Conversely, a reading of 0.3% or higher implies re-acceleration. A 0.2% monthly inflation rate sustained for a year translates to 2.43% annual inflation, while 0.3% works out to 3.66%

Fed watchers are scrutinizing the data with extraordinary precision, turning to elaborate tables and detailed forecasts. Deutsche Bank economists have published a table outlining their best guess on the policy stance of each non-Warsh member of the Federal Open Market Committee based on different levels of August PCE inflation.