In her post-FOMC press conference, Federal Reserve Chair Janet Yellen is expected to provide a concise evaluation of the current economic situation. That includes a discussion about the recent trend in low inflation and the economic impact of hurricanes Harvey and Irma. She is not expected to signal what the Fed will do with short-term interest rates in the months ahead. At this point, nobody knows – that’s the point of monetary policy being “data-dependent.”However, we can expect to hear a lot about the “temporary” or “transitory” nature of forces on the economy – and it will take some time for upcoming data reports to present a clear picture.

On the inflation front, Fed officials have signaled a belief that much of the recent trend in low inflation is transitory. Notably, March’s sharp drop in the price index for wireless telecom services shaved about 0.2 percentage point from the year-over-year increase in headline CPI inflation (and about 0.25 percentage point in the core CPI). At the same time, officials are aware that structural changes in the labor market may be preventing wage growth from rising as much as in the past.

Drilling into the details of the August CPI report, we’re still seeing a continued deflationary trend in consumer goods ex-food & energy. Despite a pickup in global economic growth, there appears to be plenty of excess capacity in the production of goods. The producer price data had shown moderate pressure in finished goods, but this failed to flow through much to the consumer level. More recently, prices of intermediate goods and materials have begun to reflect pressure. A softer dollar, now down around 10% against the major currencies since the start of the year, may add further pressure.

Last week, the key mid-month economic data (retail sales and industrial production) were disappointing. Retail sales were weaker than expected in August, with significant downward revisions to the figures for June and July. Industrial production fell far short of expectations, although partly reflecting unseasonably mild East Coast temperatures. Hurricane Harvey likely had an impact, with mixed, but mostly negative effects on retail sales (the Bureau of Census says it’s impossible to tell how much of an impact Harvey had). Oil and gas well drilling, which has been recovering since last May, had a sharp setback, which was almost certainly related to Harvey.