| US data, peak inflation and the risk of blackouts. US jobs openings and a consumer confidence gauge both topped forecasts, pointing to strength in household and labor demand. All eyes are now on how much the Fed chooses to hike in September. Given Powell stated at Jackson Hole that this will depend on the "totality of data," the level of scrutiny on economic releases will be very high, and the potential for market volatility elevated. The Conference Board's August index of sentiment rose to a three-month high, and the report also showed firmer buying plans for appliances and cars. Job vacancies, meanwhile, unexpectedly increased to 11.2 million in July. Euro-area inflation accelerated to another all-time high, strengthening the case for the European Central Bank to consider a jumbo interest-rate hike when it meets next week. Consumer prices in the 19-nation currency bloc jumped 9.1% from a year ago in August, beating the 9% median estimate in a Bloomberg survey of economists, led by energy and food. Money markets put the probability of a 75 basis-point ECB hike at more than 60%. UK inflation could top 22% next year if natural gas prices remain elevated, Goldman Sachs warned, and households are braced for big hikes in energy costs. Restaurants in North America are eating inflation costs amid a surge in reservation demand.  | Europe faces the risk of blackouts, rationing and a severe recession if Russia further slashes gas deliveries, and the next reality check is at hand. A three-day halt of the Nord Stream pipeline -- a key source of natural gas for the European Union -- started on Wednesday, and concerns are widespread that Moscow will find another excuse to clamp down on exports. Both Germany and France said they are much better prepared for Russian supply disruptions, thanks to gas-storage refills. European natural gas advanced after a two-day slump. Energy contracts retreated from records seen last week but are still trading at elevated levels throughout the continent. Stocks were again unable to shake off the post- Jackson Hole downturn. European stocks extended their monthly decline, led by energy and utilities. S&P 500 futures fell 0.2% as of 5:31 a.m. New York time after earlier gaining. A deepening yield curve inversion points to fears that the Fed will trigger a recession. European bonds slid across the curve after hotter-than-expected euro-area inflation data. A dollar gauge rose. Oil headed for a third monthly drop -- the longest losing run in more than two years -- hampered by the likelihood of slower global growth -- while gold was set for a fifth monthly drop. Today's instalment of jobs-week data bring the US August ADP employment number — a series that's recently been overhauled. Later, we'll also get the EIA crude inventory report. Earnings include Donaldson, Designer Brands, Five Below and SentinelOne. Here's what caught our eye over the past 24 hours. On the new episode of the Odd Lots podcast, Tracy Alloway and I speak to Minneapolis Fed President Neel Kashkari about what he says is the Fed's unwavering commitment to fighting inflation. We covered a lot of ground in less than an hour, though the overall consistent message is that he says the big risk is prematurely declaring victory over inflation. He also thinks the market has not appreciated how high the bar is to rate cuts. Find the episode on Apple or Spotify. One interesting slug from the transcript though while we're here... I asked him about student loan debt relief and whether that would be inflationary. His answer: student loan relief is too regressive to have a significant impact. Joe: So you mentioned fiscal stimulus. There was quite a bit of it in 2020 and also 2021. And it's winding down, it's mostly being withdrawn. That being said, it's not entirely being withdrawn. And I think one could say that The White House's student debt relief is a form of fiscal stimulus. Are you thinking about the inflationary impact of that? And do you see that affecting the trajectory of your policy?
Neel: Well, you know, we analyze whatever Congress passes in terms of the fiscal environment. And then that goes into our models as an input. My guess is it's not a huge number. You know, if you look at the student loan relief, as an example, generally speaking, it's pretty regressive, meaning it tends to skew towards people who are relatively better off in our economy. The lowest income Americans generally didn't go to college and don't have student loan debt. And the more it's regressive, which I don't think that's a policy objective of the authors, but the more it's regressive in a curious way, the less inflationary it is because those folks are less likely to spend the money on consumption. They're more likely to save the money or pay down other forms of debt. I haven't studied it very carefully. My best guess is it's not a big deal one way or the other in terms of outlook for inflation in the near term. Just like the Inflation Reduction Act. I think the CBO scored it as net deficit reducing over 10 years. My guess is it's not gonna have a big effect on inflation in the near term, but we will analyze it. We will put it into our economic models. And ultimately we'll factor that in as we come up with a interest rate outlook.
Look for the full transcript later on the Odd Lots blog. Follow Bloomberg's Joe Weisenthal on Twitter @TheStalwart | 
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