Will Thursday’s Inflation Report Support a Fed Rate Cut?

Economic

Summary:

Thursday’s CPI is expected to show headline inflation at 2.9% and core at 3.1%, still above target. Rising price pressures could limit Fed easing, but weak jobs keep cuts likely.

The Federal Reserve is widely expected to cut interest rates at next week’s policy meeting on Sep. 17. Will Thursday’s report on consumer inflation in August play along?

Economists are expecting a mixed bag for this week’s August update on the consumer price index. Headline CPI is set to edge higher to a 2.9% year-over-year pace, according to the consensus forecast via Econoday.com. If correct, the pickup will mark the fastest annual pace since January and lift the overall inflation rate further above the Fed’s 2% target.

Core CPI is expected to hold steady at 3.1% vs. the year-ago level, offering a degree of support for arguing that inflation isn’t accelerating. This measure of inflation, which strips out volatile food and energy prices, is considered a better measure of the trend. But holding steady at more than a full percentage point above the Fed’s 2% target is less than ideal for arguing that current monetary policy has tamed inflation.

Although inflation has fallen sharply over the last several years, disinflation has stalled recently and the tariffs threaten to lift pricing pressure. Thursday’s CPI update will be closely read for deciding if tariffs are finally starting to flow through to pricing data overall.

Will Thursday’s Inflation Report Support a Fed Rate Cut?_1

Reviewing several alternative measures of CPI suggests that a reflationary trend is emerging, if only gradually so far. The chart below compares year-over-year changes for the standard headline and core CPI estimates of inflation along with other measures that arguably offer a more robust measure of pricing pressure, such as the Atlanta Fed’s sticky-price CPI, a weighted basket of items that change price relatively slowly.

The average of the 1-year changes for the indexes (red line) has increased for three straight months through July. A fourth advance would be worrisome by suggesting that reflationary pressure is strengthening and that easing monetary policy would fuel this trend.

Will Thursday’s Inflation Report Support a Fed Rate Cut?_2

The challenge for the Fed is that even if inflation is picking up, the slowdown in employment growth is now seen as a higher priority for the central bank. The bond market seems to agree. The policy-sensitive US 2-year Treasury yield fell to 3.49% on Monday (Sep. 8) – a three-year low and well below the 4.33% median Fed funds target rate.

Will Thursday’s Inflation Report Support a Fed Rate Cut?_3

Cue up Thursday’s CPI update, with a crucial question in mind: Will the August inflation numbers change the calculus for next week’s Fed decision?

Source: investing

To stay updated on all economic events of today, please check out our Economic calendar

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Adam

Economic

After a weak August jobs report, markets are nearly certain the Federal Reserve will cut interest rates by 25 basis points at its policy meeting next week, with some investors even betting on a larger reduction.

Traders hope a more dovish Fed will boost equities after a choppy summer. But some Wall Street strategists warn that rate cuts may not be all good news for stocks in the near term.

Ed Yardeni, president and chief investment strategist of Yardeni Research, warned Monday that easier monetary policy could spark a destabilizing "melt-up" in US stocks without addressing America's labor supply shortage, strained by President Trump's immigration crackdown and an aging population.

"We think that by cutting rates this month, the Fed would be stimulating an economy that doesn't need easier monetary policy," he said. "Stimulating an economy that doesn't need stimulation won't create more workers to address the undersupply that's constraining the demand for labor."

Yardeni argued that with productivity improving and the unemployment rate still historically low, extra liquidity risks fueling a speculative rally driven by investor FOMO rather than fundamentals — the kind of rally, he warned, that often ends in a sharp correction.

Yardeni isn't alone in his skepticism. Others see the risks of rate cuts outweighing the potential benefits.

Stuart Kaiser, head of US equity trading strategy at Citi, called August's weak payrolls report a "negative growth signal" that is "more powerful than the benefit of rate cuts being priced in." Put simply, if hiring continues to slow and unemployment drifts higher, the drag on earnings and economic growth will matter more for equities than the short-term lift from easing monetary policy.

Meanwhile, Apollo's Torsten Sløk flagged mounting job losses in tariff-hit sectors such as manufacturing, construction, retail, and transportation. Employment growth in these industries has now turned negative, according to Sløk's research, underscoring the added strain businesses face from trade policy uncertainty. (Disclosure: Yahoo Finance is owned by Apollo Global Management.)

Inflation could also complicate the outlook if the Fed begins cutting rates in a sticky price environment. Thursday's Consumer Price Index (CPI) will show how prices are trending.

Bloomberg consensus expects August's "core" CPI, which excludes volatile categories like food and energy, to rise 0.3% month over month and 3.1% year over year, keeping inflation firmly above the Fed's 2% target. Citi noted it would take a major upside surprise to derail next week's anticipated cut, but any signs of renewed price pressure could limit how aggressively the Fed eases from here.

And with the initial estimate of annual benchmark payroll revisions showing a downward revision of 911,000 — more than the 700,000 economists expected and close to the 900,000 some had projected — another red flag is emerging, suggesting the next test for markets may come sooner rather than later.

That leaves a key question for investors and policymakers alike: Will rate cuts be deep enough to counter mounting growth risks?

Morgan Stanley strategist Mike Wilson said equities' ability to absorb labor market weakness hinges on how forcefully the Fed responds.

With inflation still on the radar and jobs data weak but not "bad enough," he cautioned that the central bank may have limited room to ease in the near term, a setup that could mean "choppy" price action through a seasonally weak September and October.

Still, Wilson argued that any pullback would likely pave the way for a stronger finish to the year and into 2026, supported by what he sees as a durable, broad-based earnings recovery.

Goldman Sachs head of US equity strategy David Kostin, meanwhile, sees an even smoother path in the near term, noting that stocks typically rally during Fed cutting cycles so long as the economy avoids a recession, which he does not view as the base case.

He expects the S&P 500 (^GSPC) to climb to 6,600 by year-end, supported by renewed earnings growth in 2026, and sees room for a rebound in small caps stocks that have lagged under higher interest rates.

"As the economy moves through the worst of the tariff impacts, we expect imminent Fed rate cuts and a re-acceleration of growth in 2026 will support further gains for US equities," Kostin said.

Source : finance.yahoo

To stay updated on all economic events of today, please check out our Economic calendar

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Manuel

Cryptocurrency

Ethena Labs submitted a proposal on Sept. 9 to become the issuer of Hyperliquid’s native stablecoin USDH, joining an increasingly competitive race.

The bid consists of backing USDH entirely by USDtb, a stablecoin backed by BlackRock’s BUIDL fund, with the support of Anchorage Digital.

Ethena is committed to returning 95% of net revenue generated from USDH reserves directly to the Hyperliquid community through HYPE token purchases and ecosystem development.

Hyperliquid launched the competitive selection process for USDH following a Sept. 5 announcement that the protocol would introduce its native stablecoin in the next network upgrade.

The move targets the $5.5 billion in USDC deposits currently serving as the primary settlement currency on the decentralized exchange.

The selection carries significant financial implications for Hyperliquid, which currently records nearly $1.3 billion in estimated annualized revenue, according to DefiLlama data. Additionally, the network achieved an all-time high monthly trading volume of $405.8 billion in perpetual contracts during August.

Different approach

Ethena’s proposal differentiates itself through institutional partnerships and proposed security infrastructure.

The company plans to establish an elected guardian network of Hyperliquid validators to oversee USDH operations, removing single-issuer control over the stablecoin’s security management.

Beyond basic stablecoin issuance, Ethena outlined plans to launch hUSDe, a Hyperliquid-native variant of its synthetic dollar product, and committed $75 million in incentives to support HIP-3 market development.

The firm also announced partnerships with Securitize to deploy tokenized real-world assets on HyperEVM and native USDtb integration.

Competing proposals

Competing proposals offer distinct approaches to USDH backing and governance. Paxos proposes backing through New York Department of Financial Services-protected accounts with monthly KPMG attestations.

Frax Finance plans frUSD backing through treasury partnerships with BlackRock and Superstate. Agora offers short-dated US Treasuries with proof of reserves powered by Chaos Labs.

Sky proposes flexible collateral backing through its risk management framework with LayerZero interoperability.

The validator-driven selection process requires proposal approval through community governance before proceeding to a gas auction for final deployment rights.

Omar Kanji from Dragonfly estimates the transition could generate $220 million in additional annualized revenue for HYPE holders while reducing Circle’s USDC supply by 7%.

Ethena emphasized its track record managing over $23 billion in tokenized dollar assets and positioned itself as the largest counterparty capable of supporting Hyperliquid’s expansion into equity perpetual swaps through HIP-3 markets.

Source: Cryptoslate

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Adam

Forex

Some contradicting headlines are influencing the US Dollar in a battle of wits right ahead of quintessential inflation data.

Markets have been unable to provide a clear answer on how the upcoming FOMC (September 17th) and its rate cut expectations will affect the future outlook for the Dollar.

The thesis had been that despite negative news (Jerome Powell's change in tone at Jackson Hole or the recent Non-Farm Payrolls), traders have failed to sell the US Dollar convincingly, with the DXY doomed in sideways action.

The freshly released downward revisioned BLS report (bearish for the USD) and the rising tensions in the Middle East with Israel-Hamas war taking another turn (bullish for the USD) are once again prevented a clear path ahead for the Greenback.

However, some interesting technical patterns might be getting into play as we approach the surely decisive pair of inflation reports in the US PPI (8:30 E.T. tomorrow) and Thursday's CPI report.

Let's take a look at the Dollar Index.

How could the data influence the US Dollar? Potential reactions

The upcoming PPI report should bring back memories of the previous humoungous beat in the past month (0.9% vs 0.2% exp) pushing inflation expectations higher for the consecutive University of Michigan surveys (the FED hates that).

This comes as Participants started to be less and less cocnerned by tariffs and their impact.

Despite hurting producers before consumers, fears are that Producer Prices increases will repercutate in upcoming CPI releases, highlighting Thursday's number even more.

A relatively weak PPI could help to support current sentiment quite largely, indicating that the past month increase was just a one off – This should support a 50 bps cut further (Dollar down).

However an upward beat should do just the reverse and add to the anxiety (Dollar up)

CPI will really be in focus however as Participants look to see if the higher producing costs have started to bite in consumers pockets.

Reactions should be similar to the PPI, but their extent could be much larger: A higher inflation for Consumers should prevent a 50 bps entirely, towards more gradual cut and spark stagflation fears.

US Dollar could hence maintain its sideways movement.

Dollar Index intraday outlook

Dollar Index 4H Chart

US Dollar Index (DXY) 4H Chart, September 9, 2025

Last week's data has brought some renewed selling momentum as bears have managed to form a downward tight bear channel (bear candles overlapping each other).

The weekly open hence formed a small gap to test the July support/pivot zone, and this morning of action actually saw a decent rebound, undoing some of the bear advantage.

Arriving at a key technical standpoint, bears entering here could take the hand by rejecting the 97.60 to 97.80 range lows (break-retest style).

Keep in mind that action will be swift tomorrow (expect spikes) and prices may just dawdle around until then.

Key levels of interest for the Dollar Index:

Support Levels:

97.40 to 97.80 Range Support (currently getting tested)

Last Pivot before run-higher 97.15 Zone acting as Key Support

2025 Lows Major support 96.50 to 97.00

Resistance Levels:

98.00 Mid-Range pivot

98.50 to 98.80 Resistance Zone

Mid-line of the ascending channel and psychological level 99.50

100.00 Main resistance zone

Dollar Index 30m Chart

Dollar Index (DXY) 30M Chart, September 9, 2025

Looking closer to the short-timeframe, the support zone that is currently trading will be a major test for bulls.

Managing to hold the lows of the current support (97.40, immediate short-term support) would indicate balanced action, which would be more in the bulls favor after failing to hold lower.

On the other hand, sellers appearing at the immediate short-term resistance (97.70) could trigger break-retest selling reactions.

Source: marketpulse

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Adam

Commodity

Gold prices are near steady and silver prices lower near midday. Profit taking is featured today after gold earlier in the day hit new contract/record highs. Silver prices are lower, also on profit taking after hitting a 14-year high on Monday. Bullish fundamentals and bullish technical charts are likely to continue to fuel the bull market runs in both precious metals. December gold was last up $1.80 at $3,679.00. December silver prices were down $0.517 at $41.385.

The key outside markets today see the U.S. dollar index firmer, while crude oil futures are higher and trading around $63.25 a barrel. The yield on the benchmark 10-year U.S. Treasury note is presently around 4.1%.

Mild profit taking in gold after new all-time high set earlier today_1

Technically, December gold futures bulls have the strong overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $3,750.00. Bears' next near-term downside price objective is pushing futures prices below solid technical support at $3,550.00. First resistance is seen at $3,700.00 and then at today’s contract high of $3,715.20. First support is seen at today’s low of $3,665.30 and then at $3,650.00. Wyckoff's Market Rating: 8.5.

Mild profit taking in gold after new all-time high set earlier today_2

December silver futures bulls have the solid overall near-term technical advantage. A bull flag pattern has formed on the daily bar chart. Silver bulls' next upside price objective is closing prices above solid technical resistance at $45.00. The next downside price objective for the bears is closing prices below solid support at $38.00. First resistance is seen at this week’s high of $42.355 and then at $43.00. Next support is seen at this week’s low of $41.08 and then at last week’s low of $40.555. Wyckoff's Market Rating: 8.5.

Source: kitco

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Adam

Commodity

Silver prices continue to trade near their highest levels in 14 years as investment demand becomes a driving force in the marketplace. However, silver’s industrial component continues to attract significant attention and volatility.

Late last week, President Donald Trump issued an executive order clarifying tariff exemptions for some important metals, including gold, graphite, tungsten, and uranium. However, analysts note that silver did not make the official list.

This uncertainty has caused a sharp rise in silver’s lease rate. Bernard Dahdah, Precious Metals Analyst at Natixis, said that silver’s go-forward rate is at unusual levels, currently in negative territory around 1.2%.

“In layman’s terms, it means that the party borrowing silver is actually willing to pay rather than earn interest from the counterparty with which it will swap its USD for silver. Meanwhile, those leasing out silver are earning around 5.5% on a 3-month basis,” he said.

Dahdah noted that lease rates in silver started to rise again—highlighting renewed tightness in the marketplace—after the precious metal was added to the U.S. government’s critical minerals list last month.

He added that silver’s new status could attract the attention of President Donald Trump, who ordered an investigation into critical minerals in April.

“Since this announcement, the silver Exchange for Physical (EFP, COMEX vs. London spot) has gone from a historic average of 25 cents to as much as $1.1/oz, suggesting very strong U.S. demand for the physical material. This demand for physical is in turn reducing the pool of available leasable material in London and, as such, lifting silver’s lease rate,” he said.

According to reports, this is the fifth time this year that silver lease rates have spiked.

Some analysts note that this tightness in the silver market is not surprising, as physical inventories within the London Bullion Market Association are at exceptionally low levels.

In a recent note, commodity analysts at TD Securities said that silver inventories could be depleted within seven months. If investment demand in silver-backed exchange-traded funds picks up, those stockpiles could dry up within four months.

Tightness in the market can also be seen in the arbitrage between futures contracts in New York and London spot prices. December silver futures are currently trading 55 cents above spot.

Although tightness in the silver market could persist, Dahdah said that he expects lease rates to ease within the next month. While the risk of silver being subject to tariffs is elevated, some analysts believe this is unlikely to happen.

Domestic silver production only accounts for three-quarters of domestic demand, and the U.S. needs to import about 1,000 tonnes of silver a year.

“The Section 232 investigation on critical minerals is scheduled to be released around mid-October and is likely to include recommendations on silver (which might include adding tariffs, or not),” Dahdah said. “This could be the point after which the silver lease rate retreats rapidly. An earlier public statement of reassurance would have the same impact.”

Source: kitco

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Kevin Du

Energy

With interest rates in freefall in recent days, but reversing modestly this morning, traders were wondering if today's auction of $58BN in 3 year paper would accentuate the modest reversal or extend on the positive momentum observed over the past week. The answer was resoundingly the latter, and here's why.

First, the auction stopped at high yield of 3.485%, down sharply from 3.669% last month, and the lowest since Sept 2024 when the Fed was about to cut rates by a jumbo 50bps on another huge downward jobs revision print. The auction stopped through the When Issued 3.492% by 0.7bps, and following 3 straight tailing auctions, was the biggest through since Feb 2025.

The bid to cover was an impressive 2.726%, up 20bps from August and the highest since February.

The internals were even more impressive, with Indirects taking down a near record 74.24%, up from 53.99% in August and the 2nd highest on record!

And with Directs awarded 17.39%, Dealers were left with just 8.37%, the lowest on record.

Overall this was a blowout 3Y auction, easily one of the top 3 on record, and the bond market certainly liked it: with yields moving higher after today's record negative revision (on expecations of steepening that will follow the inflation that rate cuts usher in) we have seen renewed buying across the curve.