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Last week was largely quiet on the economic news front. This week is the opposite, as investors await two big reports which will impact markets.

The Personal Consumption Expenditures (PCE) index—the Fed's preferred inflation indicator—is scheduled for release this Thursday morning, followed by the August Jobs Report Friday morning.

The setup is really dangerous. PCE is going to accelerate. That we know,” Keith McCullough warns in this clip from The Macro Show. “We’ve already modeled it, we know what the components have done, we’ve already had the headline inflation CPI number do the same. PCE is going to go up.” 

Fed Chair Jerome Powell has already shown his hawkish stance is based on this (lagging) indicator. The nonfarm payroll report released the following day could further whet his appetite for more rate hikes. 

“The wild card is the jobs report,” McCullough adds.

“The bond market would argue right now you don’t need to go back-to-back hawkish, but if you do, it’s going to be even more hawkish because you’re going into a long weekend after people got absolutely crushed in August.” 

Watch the full clip above. 

McCullough: ‘A Really Dangerous Setup’ Ahead of Two Big Reports - TMS Banner