U.S. July CPI Eases Fed Hike Concerns, But High Deficits and Yen Pressure Remain

Huo Xing Finance reports: On August 13, the U.S. July CPI rose 0.1% month-over-month and 3.4% year-over-year, with core CPI rising 2.5% year-over-year, indicating moderate overall inflation. Declining energy prices offset some upward pressure from housing costs. Following the data release, market pricing for a Fed rate hike in September fell from around 50% to approximately 40%, easing short-term policy pressure. However, this CPI reading alone is insufficient to generate outright easing expectations. The U.S. fiscal deficit continues to widen, with cumulative deficits over the first ten months nearing $1.8 trillion and total national debt approaching $40 trillion, while interest expenditures continue to rise. Under these conditions, the U.S. must continue issuing large volumes of Treasuries;此次拍卖的10年期美债收益率升至2007年以来最高水平，30年期收益率更逼近5.25%，反映出长期资金成本受到财政供给、通胀黏性与市场风险溢价的共同推动。 Thus, the key issue in U.S. interest rate markets is no longer merely whether the Fed will hike rates in September, but whether long-term yields will continue rising despite the Fed holding rates steady—due to persistent fiscal deficits and rising debt supply. This implies that financial conditions may not improve in tandem with policy rate cuts; for high-valuation, highly leveraged assets, long-term yields remain a critical source of pressure. In Asia, the yen has again approached the 160 level. Japan’s July PPI rose 7.2% year-over-year, increasing expectations for a Bank of Japan rate hike in September. If Japanese monetary policy further normalizes and the U.S.-Japan yield differential narrows, global capital allocation and yen carry trades could be significantly affected. Gold has regained support due to declining tail risks from rate hikes, a weaker dollar, and renewed fiscal uncertainty—but its current rebound is more tactical, driven by shifting rate expectations rather than pure dovish trading. Future developments at the Jackson Hole symposium, along with upcoming inflation and employment data, will determine whether gold’s rally can be sustained. Meanwhile, the Russia-Ukraine conflict is reintroducing energy and food supply risks into global markets. Russia and Ukraine have continued targeting Black Sea ports, energy infrastructure, and merchant vessels; Ukraine is currently in its peak grain export season. Further disruption to Black Sea shipping could push up wheat and related food prices, compounding existing energy inflation risks. Overall, the July CPI has reduced immediate pressure for a Fed rate hike but has not alleviated the U.S.’s constraints from high deficits, elevated debt levels, and persistently high long-term yields. Going forward, global asset pricing will increasingly hinge on the tug-of-war between “whether inflation continues to cool” and “whether fiscal supply pushes up long-term rates.” For highly volatile assets like Bitcoin, short-term focus should remain on U.S. dollar liquidity and long-term Treasury yields—not merely on the Fed’s policy rate itself.