According to Jin10, Huatai Securities said August core inflation rose more than expected on a month-on-month basis, making a September Federal Reserve rate hike a "must" and increasing the credibility risk of not hiking in September. The report said August nonfarm payrolls also beat expectations, Middle East tensions pushed oil prices above $100, and August CPI became the key variable in market pricing of whether the Fed will hike in September. It added that core inflation in August accelerated more than expected, while the core services ex-housing component watched by the Fed did not show further signs of slowing. The report also said low inventories, concerns over surging oil prices, AI-driven price increases passing through to downstream sectors, and a new round of local tariffs could all disrupt the pace of U.S. disinflation. Looking ahead, the report said CPI data may push neutral voter Christopher Waller to turn hawkish at the September FOMC meeting, reducing internal Fed resistance to a September hike. It added that August data also cleared obstacles for a rate hike, and if Kevin Warsh fails to deliver on his hawkish pledge from the August Jackson Hole meeting in September, the Fed's credibility will face a greater challenge and long-term U.S. Treasury yields will be harder to control.
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