11.09.2026 - Inflation Pressure – No Signs of Panic
US inflation remained stubbornly elevated in August, reinforcing the case for the Federal Reserve to raise interest rates at next week’s meeting.
The Consumer Price Index rose 0.4% month-on-month and 3.4% year-on-year, both in line with expectations.
However, underlying inflation pressures were somewhat stronger than anticipated. Core CPI increased 0.3% month-on-month, 0.1 percentage point above consensus, while the annual core rate came in at 2.4%.
Despite persistent inflation, elevated bond yields and oil prices above USD 100/barrel, investors appear remarkably complacent. US equity futures initially spiked following the release, while volatility moved lower.
Markets:
Equities: Moving higher, with US futures initially spiking after the CPI release
Bonds: yields falling from intraday highs - US 2y yield above 2.6%, US 10y yield above 4.92%, Japan 10y yield 2.99%
Commodities: Profit taking in oil prices, WTI falling back below USD 99/barrel and Brent around USD 104/barrel
Precious metals prices jump, gold USD 4’390/oz, silver above USD 65/ozCurrencies: US dollar almost unchanged - Japanese Yen moves higher USDJPY 153
Cryptos: Risk-on sentiment moves prices higher - Bitcoin above USD 77k
Volatility: The VIX index falls back towards 15 (good opportunity for hedging)
My View: After yesterday’s Producer Prices, today’s CPI report is the final major inflation indicator the Fed will receive before next week’s policy meeting, which concludes on Wednesday.
As highlighted in my Weekend Mail, I continue to believe the Fed needs to hike rates. From an economic perspective, I see little reason not to. The bigger question is one of credibility and independence in case the Fed should keep rates on hold.
What concerns me even more is the market’s reaction. There are currently several major warning signs: persistent inflation, oil above USD 100/barrel, historically elevated bond yields and continued geopolitical uncertainty.
Yet markets are showing almost no signs of stress. Equities remain resilient, risk assets are moving higher and volatility has fallen back towards 15.
This combination should not be ignored. Complacency seems to be the biggest risk right now.
When investors stop taking obvious risks seriously, markets become increasingly vulnerable to a sudden repricing. With volatility still low, I continue to see attractive opportunities to hedge portfolios before markets potentially start taking these warning signs more seriously.
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