(Reuters) -The U.S. central bank held its benchmark overnight interest rate steady in the 5.25%-5.50% range at the conclusion of its July 30-31 policy meeting, but since then Federal Reserve Chair Jerome Powell has declared "the time has come for policy to adjust," signaling that rate cuts are likely to begin at the Sept. 17-18 meeting.

Just what size of a reduction - 25 basis points or 50 - will hinge on data between now and then.

Among the key statistics the U.S. central bank is watching:

INFLATION (CPI released Sept. 11; PCE released Aug. 30; next PCE release Sept. 27)

The consumer price index rose 0.2% in August after edging up by the same margin in July, a welcome development for the Fed as it seeks to return inflation to its 2% goal. In the 12 months through August, the CPI advanced 2.5%, the smallest year-on-year rise since February 2021 and down from a 2.9% increase in July.

However, excluding the volatile food and energy components, the CPI climbed 0.3% in August after rising 0.2% in July, driven by stubbornly high housing costs. Shelter costs saw their largest increase since January. In the 12 months through August, the so-called core CPI increased 3.2%, unchanged from July, and that lingering stickiness caused traders to boost bets for a quarter-percentage-point rate cut at the Fed's meeting next week to a roughly 85% probability.

Late last month, the personal consumption expenditures price index, which the Fed uses to set its 2% inflation target, came in slightly softer than forecast in July, with an annual increase of 2.5%, the same as in June. The core index excluding food and energy costs was also slightly lower than forecast at 2.6%, also unchanged from the month before.

The headline PCE monthly rate in July was 0.2%, as was the core rate, reinforcing confidence at that time that inflation was essentially now trending at rates at or just below the Fed's target.

EMPLOYMENT (Released Sept. 6; next release Oct. 4):

U.S. firms added a weaker-than-expected 142,000 jobs in August, and revisions to the prior two months knocked 86,000 positions from the previously estimated number of payroll jobs. That pushed the three-month average total payroll growth down to 116,000, well below the level typical before the COVID-19 pandemic, adding further evidence that the economy is slowing.

The unemployment rate, however, edged down to 4.2%, which could allay some fears that the labor market is deteriorating rapidly or that the economy is on the cusp of recession.

Average hourly wages also rose 3.8% in August compared to a year ago, versus a 3.6% annual increase in July, which could provide a wrinkle to the Fed's deliberations later this month as officials are still anxious to make sure inflation is fully tamed. The U.S. central bank generally considers wage growth in the range of 3.0%-3.5% as consistent with its 2% inflation target.

JOB OPENINGS (Released Sept. 4; next release Oct. 1):

Most Fed officials in the last couple of months have turned their primary attention from inflation to the job market, which this summer began exhibiting clear signs of weakening.

That shift in focus was further validated by data showing job openings in July were the lowest in more than three years, according to the U.S. Labor Department's Job Openings and Labor Turnover Survey (JOLTS). Moreover, the ratio of vacant jobs to each unemployed person fell to 1.1-to-1 and is now lower than its average in the 12 months preceding the COVID-19 pandemic.

Fed officials may also voice concern about the rise in layoffs reflected in the report. The recent rise in the unemployment rate had largely been seen as a result of an increase in the size of the workforce, with outright job cuts remaining low until now. The JOLTS data showed layoffs totaled 1.76 million in July, the most since March 2023.