Surging oil prices and sinking bonds have decided the Fed need to hike

The useful part

WTI is up $4.25 on the day to $100.42, breaking the key psychological barrier as it continues to explode higher. Yesterday, Trump said the war wouldn't end until after the midterms and the market is taking that as a reason to load up. The eagerly anticipated August CPI report tomorrow was seen as pivotal for the Fed but at these prices, a very hot September CPI is a foregone conclusion as gasoline and diesel prices spike.

How it works

• US 10-year yields are up 6.6 bps to 4.90%, which is the highest since 2023.
• Yesterday, Trump promised to send Americans $5000 checks if Republicans win the House and Senate.
• Of course, he also promised checks for DOGE savings and tariffs but neither of those materialized.
• Adding to the case for a Fed rate hike on Sept 16 was the PPI report today.
• Tomorrow's CPI report is expected at 3.4% y/y and 0.4% m/m and this adds a slight upward bias to that reading.

Details worth keeping

Fed will have no other choice but to hike rates. Oil is up for the eigth consecutive day and the gains are accelerating. It saw inflation at 5.4% compared to 5.3% expected.