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Right, the Brazilian consumer in focus this morning, retail sales growing four tenths of a percent in September from a month ago, slightly more than what analysts were expecting, and the jobs market not signaling a slowdown. Jobless claims coming in below the street's expectations. Of course, that is viewed as good news here for the health and stability of the labor market. Here to break it all down, we want to bring in Kathy Bosjancic, Nationwide chief economist and senior vice president. Kathy, it's great to have you here. So, when you take a look, let's start with retail sales. It was broad gains, we saw this rebound in discretionary spending here this morning. Talk of this, there's some talk of this report now boosting the narrative that's been out there in the street over the last couple weeks or so about boosting the idea of that no landing thesis. What do you think?

Well, good morning, Shana. Happy to be with you. Um, yeah, these are, uh, you know, indications of a continued, um, healthy and robust, um, consumer spending. It, it really caps off a very strong third quarter result, and particularly what we look at, this is the start, you know, kind of the momentum heading into the fourth quarter, it's a handoff from Q3 to Q4, and, and it shows that the consumer continues to power along here and, and that's positive, right, for, for the overall economy. It's really been consumer spending buoying, uh, the, the overall, um, GDP growth in, in the US. So that idea that we don't have a landing or much of a slowdown, I think that, that does, the, the data are supporting that, that thesis at this point.

And, and so with that in mind, I mean, what then do you think the Fed is going to do at this point, really kind of digesting so much of the, the data points that are suggesting, hey, this, this could be effectively what we're looking at in the soft landing scenario, or even a no landing that continues to see their dual mandate at least be satisfied more broadly. And what policy action do you think needs to be initiated, if any?

Yeah, great question, and it is really what, you know, the markets are struggling with right now. And I guess it's a, it's a good problem for the Fed to struggle with, right, that, uh, economic growth continues to surprise, um, in the month of September on the high side. So it was, you know, retail sales, but start before that, it was employment, and, and, but along with that, inflation came in a bit firmer as well. So it does, I think give them a little bit of, um, you know, a pause, as just to say, uh, do, do we need to pause, you know, the, the continued rate cuts? Um, that, you know, we kick things off with 50 basis points. Do we need to continue that? Do we, do we pause in November, take a little break and assess the data? Um, I, you know, I think there's still a strong argument for them to cut rates in November. They could just pair the size back from 50 to 25 basis points. Um, but it's not a slam dunk that, that they will, will cut rates. Um, one of the things that we're looking at is that monetary policy we still see overall is quite restrictive. Um, there, the, the housing market is still, um, struggling and, and suffering under the, the weight of, of high interest rates. Mortgage rates actually are going further north and rising because we're seeing 10-year yields, you know, break above 4% and rising. Um, so that little reprieve we saw in lower mortgage rates, that's been erased. And you still see borrowing rates for autos and, and for credit cards are still very high. And remember that disproportionately weighs on lower income and middle income households. So there's still restrictiveness, but the Fed does have to kind of debate whether they keep going and maybe that you reignite inflation to some degree, or at least you stop the disinflationary process. We don't think that's the case, but, but that's what they're going to be debating.

Why are you so confident that, that we're still in this downward trend when it comes to inflation?

Really, when we look at the bottom-up factors, um, we, we don't see a lot of reason, you know, to, to worry about some of the pop in readings that we got in September. Like, there were idiosyncratic increases. Like, apparel prices were up over 1%, that's not likely to continue to repeat. Even things like little smaller in detail, but, um, sporting events costs were up almost 11%. And there were just other categories like that. Medical care services pop. Um, it doesn't mean that we can't have some, you know, maybe a slower downward trajectory, but what's really encouraging is that, um, shelter costs, um, the increase there slowed. And all of the data we've been looking at, new rental data, uh, total, uh, rental data suggests that, um, rental inflation's easing, and that means shelter inflation's going to ease, and that's a large share of core CPI, uh, over 30%, and a large share of services, which have been the stickiest part of inflation.

Kathy Bosjancic, who is the Nationwide chief economist and senior vice president. Thanks so much for taking the time here with us, Kathy.

My pleasure.