Rate Hike Expectations Heat Up

August PPI rose 5.4% year on year, exceeding market expectations of 5.3%, indicating a clear pickup in producer-side inflation. More interestingly, it rose only 0.4% month on month, in line with expectations. So what truly made the market nervous was the renewed acceleration in year-on-year growth, not the monthly figure itself.
After the data was released, U.S. Treasury yields continued to rise, and market bets on a Fed rate hike heated up noticeably. Reports showed that the probability of a rate hike at the September meeting briefly rose to around 70%. (Reuters)
But it would also be premature to declare that “inflation is out of control.” Core PPI rose just 0.2% month on month, below the market expectation of 0.3%, suggesting that after excluding food and energy, the pressure is not as severe as the headline data indicates.
Therefore, what will truly determine the market’s direction is the upcoming CPI. If CPI is moderate, PPI may prove to be a false alarm; if CPI is also hotter than expected, U.S. stocks, gold, and Bitcoin will all have to confront renewed interest-rate pressure.#美国8月PPI录得5.4%高于预期