Inflation and Retail Sales to Test Fed Rate Outlook Amid Weak Jobs Report

This week's economic releases will test the Federal Reserve's rate outlook, particularly after last week's disappointing July payrolls numbers. The unemployment rate did edge down to 4.1%, but the 23,000 job loss was a surprise. The 2-year Treasury yield fell initially before recovering to its previous level near 4.21%.

The spotlight shifts to inflation this week, with the release of July's Consumer Price Index (CPI) on Wednesday and Producer Price Index (PPI) on Thursday. The Cleveland Fed model projects a modest 0.1% monthly increase in headline CPI, down from June's 3.5%, and a 2.5% yearly gain.

June's PPI Final Demand rose 5.5% year-over-year, with the core measure firming to 5.1%. The retail sales release on Friday follows a 6.7% yearly increase in June. The weekly Redbook same-store sales index has slipped but remains high at 8.2% year-over-year.