11.09.25 - Higher inflation print

The August CPI came in mixed: headline prices rose 0.4% MoM (above 0.3% expected) but annual inflation held at 2.9%, in line with forecasts. Core CPI matched estimates at 0.3% MoM / 3.1% YoY.

Yesterday’s softer PPI and a jump in jobless claims (263k vs. 235k expected) reinforced expectations that the Fed will cut rates next week. Markets see a 25bps cut as certain, with a 50bps cut still on the table.

Markets: Investors rate speculations continue

S&P 500: trading at record highs

• US Futures gain 0.2%

• US 10-year yield quickly touched 4.0%

• Gold: a quick bounce before giving up some gains of recent days

• US dollar: heading south

• Cryptos: give up most of their intraday gains

My View: The Fed’s balancing act continues. Inflation isn’t fully conquered, but some cracks in the labor market are becoming more visible. With the PPI cooling and jobless claims jumping, the central bank seems to have the cover it needs to ease.

A quarter-point cut is almost locked in; a half-point remains a wild card. Markets are pricing in the best-case scenario, hoping for easing policy and expecting a cooling inflation. With this speculation, the rally might have room to continue. However, with such speculative bets, the risk of disappointment is rising.

Become a member to access more valuable market updates like this.