10.09.2026 - Price Shock
US producer prices added another warning signal for inflation.
The Producer Price Index (PPI) rose 0.4% in August, in line with expectations, while July was revised slightly higher to +0.1%. On an annual basis, producer price inflation accelerated to 5.4%, slightly above forecasts and remaining at a highly elevated level.
Excluding food and energy, core PPI increased 0.2%, slightly below expectations of +0.3%.
The latest data comes at a particularly difficult moment for the Federal Reserve. Oil prices have surged above USD 100/barrel, adding another potential source of inflationary pressure, while government bond yields continue to climb.
As a result, markets are increasingly adjusting their expectations for next week's Fed meeting. The probability of a September rate hike has risen to around 70%, although a significant share of investors still expects the Fed to leave rates unchanged.
Markets:
Equities: Broadly lower
Bonds: yields moving to new highs - US 10y yield above 4.92%, Japan 10y yield 2.92%
Commodities: Oil prices substantially higher, WTI around USD 100/barrel and Brent around USD 106/barrel
Precious metals prices fall, gold USD 4’365/oz, silver above USD 64/ozCurrencies: US dollar slightly higher - Japanese Yen falls, USDJPY 154
Cryptos: Risk-off sentiment is weighing on cryptos - Bitcoin falling down to USD 77k
Volatility: The VIX index rises slightly 17 (still good opportunity for hedging)
My View: Scott Bessent's attempts to calm the bond market have so far produced an uncomfortable result: US borrowing costs have risen even further.
The message from the bond market is becoming increasingly clear. Investors see persistent fiscal deficits, a rapidly growing debt burden, stubborn inflation and renewed upward pressure from energy prices. If Washington wants investors to finance this debt, they are increasingly demanding higher compensation.
The latest PPI reading gives bond investors another reason to demand higher yields.
This is also increasingly moving market expectations towards the scenario I have been highlighting for some time. I have consistently expected the Fed to raise rates in September, while the broader market remained considerably more optimistic about the inflation outlook and monetary policy.
Markets are now starting to price this scenario more aggressively, with the probability of a hike rising to around 70%. However, a significant share of investors still expects rates to remain unchanged.
With producer inflation at 5.4%, oil above USD 100 and bond yields reaching new highs, the Fed's room for manoeuvre is becoming increasingly limited.
The inflation problem is far from solved — and the bond market is increasingly forcing investors to face that reality.
Tomorrow’s CPI figures should provide further clarity on the inflation outlook and could ultimately determine the Fed’s decision next week.
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