U.S. PCE Inflation Remains Unchanged, Bond Yields and BOJ Hike Expectations Rise

Huo Xing Finance reports that on August 27, the U.S. July PCE inflation rose 3.7% year-over-year, and core PCE rose 3.3% year-over-year—both in line with expectations, yet inflationary pressures remain resilient. Meanwhile, U.S. consumer confidence fell to its lowest level this year, and real consumer spending grew almost zero, indicating that high mortgage rates and living costs continue to suppress demand. As a result, market expectations for a Fed rate hike in September rose from approximately 36% to 42%. Powell’s remarks at the Jackson Hole symposium on the sources of inflation and the path of interest rates will serve as a key signal. On another front, U.S. federal debt has surpassed $40 trillion, prompting markets to speculate that the Treasury may reduce long-term borrowing pressure by increasing short-term debt issuance, cutting some long-term bond sales, and expanding buybacks. However, the massive demand for fiscal financing remains difficult to alleviate. Simultaneously, the Bank of Japan has signaled a more hawkish stance, with expectations for a September rate hike nearing 90%. Capital repatriation from Japan and increased global competition for bond supply could further push up long-term funding costs. Overall, the coexistence of weakening U.S. demand and persistent inflation, combined with U.S. fiscal expansion, Japan’s monetary normalization, and energy supply risks, continues to constrain global downward pressure on interest rates. For equities and crypto assets, the key concern going forward is not merely whether the Fed will hike rates, but whether long-term yields and global liquidity will remain under sustained pressure.