BlockBeats report: On September 10, market attention was heavily focused on the August CPI data released on Friday. A monthly core CPI increase of 0.2% or 0.3% could directly influence the Fed’s policy decision in September. Currently, market expectations for a rate hike have risen from 35% before Walsh’s speech to approximately 60%, indicating that investors have already priced in a more hawkish policy scenario. If inflation shows a clear slowdown, the Fed still has reason to wait; however, if the data comes in hotter than expected, the recent summer improvement in inflation may again be questioned as merely temporary, significantly narrowing Walsh’s room to maintain current rates.
The real challenge isn't the monthly data, but the persistent multiple supply pressures underlying inflation. The geopolitical situation in the Middle East has pushed oil prices close to $100 per barrel, while new tariffs and AI infrastructure demands are straining supply chains—all of which could cause price pressures to rebuild. Therefore, the market needs to assess not whether August’s CPI is high or low, but whether underlying inflation remains above the Federal Reserve’s acceptable range.
Meanwhile, the U.S. Treasury market is testing the limits of the Treasury’s policy tools. Although the Treasury raised the cap on long-term bond buybacks to $6 billion, the 10-year yield still rose to around 4.85%, indicating that buybacks can improve some liquidity and maturity structure but struggle to offset fiscal deficits, massive debt issuance demands, and rising interest rate expectations. When markets no longer rely solely on policy signals but instead reprice assets based on fundamentals, the Treasury can influence trading dynamics—but may not determine the equilibrium yield.
Therefore, the true key in September is no longer the single CPI number, but whether inflation, energy, and fiscal pressures collectively extend the high-interest-rate cycle. If CPI is weak, U.S. Treasuries and risk assets may get some relief; if CPI is hotter than expected, expectations of Fed rate hikes and long-term yields could further reinforce each other, placing greater pressure on financial conditions.