ECB Hikes, Fed Locked In on Hot CPI — SkimNews
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- ECB raised its deposit rate 25bp to 2.50%, its second hike of the year, explicitly citing Iran-war energy disruption even as core CPI eased to 2.4%.link ›
- August US core CPI rose 0.3%, hotter than the 0.2% expected; gasoline jumped 3.9% as Middle East tensions pushed the broader energy index up 2.1%.link ›
- Fed funds futures shifted to a 90% probability of a September 16 hike, up from 70% before the CPI release.link ›
- August PPI rose 0.4% on a 4.2% wholesale energy surge after two consecutive monthly declines.link ›
- Lagarde projects eurozone inflation at 3.0% this year, 2.5% in 2027, and 2.1% in 2028 — above the 2% target through 2028.link ›
- Treasury announced a $6B buyback of 10- and 20-year notes, triple its normal $2B operation; the 30-year yield punched to 5.307% anyway.link ›
- Stanley Druckenmiller, in a WSJ op-ed, warned 'governments defending prices against fundamentals always lose' — a pointed rebuke of his former protégé Scott Bessent.link ›
The ECB's 25bp hike to 2.50% — its second of the year, explicitly tied to Iran-war energy disruption — combined with a hot August print to lock the Fed into a September 16 hike. Core CPI rose 0.3% versus 0.2% expected, gasoline jumped 3.9%, and PPI added a 0.4% wholesale surge with energy up 4.2%. Fed funds futures now price a 90% probability. Lagarde projects inflation above target through 2028. Stanley Druckenmiller used a WSJ op-ed to warn Bessent that 'governments defending prices against fundamentals always lose' — hours before a $6B Treasury buyback failed to stop the 30-year at 5.307%.
The stories behind this week
Inflation persisted in August, potentially locking in a Fed interest rate hikeThe stronger-than-expected core CPI reading shifts the Fed toward a rate hike next week, increasing borrowing costs for consumers and businesses just as energy prices threaten to reignite broader inflation. With markets now pricing in a 90% chance, the central bank faces mounting pressure to act despite prior hopes for a pause.
ECB raises interest rates in effort to curb energy-fuelled inflationThe ECB has now hiked twice in a tightening cycle most economists expected to be over, explicitly linking the move to Iran-war energy disruption. With core inflation already easing to 2.4% and companies absorbing costs rather than passing them through, the ECB is tightening into an economy that may not need it — while long-term bond yields at pre-financial-crisis highs are independently tightening financing conditions across the euro zone.
US Wholesale Prices Rise 0.4% in AugustWith inflation pressures reaccelerating and new methodology clouding near-term PCE clarity, the Fed faces heightened pressure to act—delay risks undermining credibility, especially after Warsh's hawkish Jackson Hole signal and rising Treasury yields.
ECB to Hike Rates as Bond Markets Split on Terminal RateThe split between bond markets (pricing three more hikes through June 2027) and analysts/clients expecting a more dovish tone puts Lagarde's every word under a microscope — a hawkish signal could destabilize already-fragile European bond markets with France's fiscal concerns and unresolved Strait of Hormuz oil supply disruptions hanging over the inflation outlook.
Treasury Department to buy back up to $6 billion in longer-term debt, triple the normal levelTreasury delivered less than the $8-10 billion some analysts had speculated, and the immediate market reaction—yields rising across the curve—suggests the intervention didn't reassure bond buyers. With $40 trillion in government debt, crude above $100, and Druckenmiller publicly warning that defending a price against fundamentals always fails, Bessent now faces a choice between escalating buybacks or conceding, with the Fed's rate decision looming in seven days.
CPI Report Looms as Fed Weighs Rate Hike Amid Oil SurgeWith the Fed explicitly on the fence and markets already pricing rate sensitivity, Friday's CPI number is the single data point that will tip the rate decision one way or the other — making this one of the last opportunities before the next meeting for policymakers to read the inflation trajectory clearly.
Macy's Beats Q2, Raises Guidance — Stock Falls AnywayMacy's cleared Q2 estimates and raised guidance across net sales, comparable sales, and EPS, yet shares slipped — a split that exposes investor skepticism as the three-year turnaround plan nears its end. Bloomingdale's 11.3% comparable gain carried the quarter while the namesake brand managed only 1.1%.
ECB Raises Deposit Rate to 2.5% on Inflation RisksFor European borrowers and governments, the ECB’s 25-basis-point increase to a 2.5% deposit rate tightens the policy setting while euro-zone inflation reached 3.3% in August and energy inflation surged to 14.3%. European bond yields have risen to multi-decade highs, reflecting the same inflation and rate-hike repricing behind the ECB action.
Why it matters: Two of the world's biggest central banks are simultaneously tightening into the same oil shock, raising borrowing costs for households, businesses, and governments already grappling with multi-decade-high long-term yields — the opposite of what the pre-summer consensus expected for September.
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