Federal Reserve Governor Christopher Waller told investors overnight to “give disinflation a chance” as global bond yields surged. He signaled that the upcoming August consumer price index (CPI) report, not the non‑farm payrolls numbers, will be the decisive factor for the Fed’s next policy move.
Why the CPI matters more than payrolls
Waller explained that while the labor market remains a vital gauge, the August payrolls estimate—projected at an increase of 56,000 jobs after a surprise loss of 23,000 the month before—does not capture the inflation pressures the Fed is targeting. He warned that markets are currently treating this month’s interest‑rate decision as a coin flip: either the Fed holds rates steady or delivers its first hike in three years.
Economists expect the unemployment rate to stay at 4.1%, with a slight risk of edging to 4.2%. A weaker jobs report could tilt the balance toward a pause, while a stronger reading would give the Fed cover to raise rates.
Market reactions across the globe
Asian equity markets reacted positively, with Japan’s Nikkei up 1.1%, South Korea’s KOSPI rising 1.3%, and Hong Kong’s Hang Seng jumping 2.1%. In contrast, Wall Street and European futures were largely flat at the time of writing.
Short‑term Treasury yields rallied and the yield curve steepened, indicating that investors in longer‑dated bonds would rather see a rate hike now to pre‑empt further inflation. Oil prices hovered near six‑week highs, with Brent crude futures up 7% for the week, trading around $95.50 a barrel.
Currency moves and possible central‑bank actions
The U.S. dollar’s retreat helped the Japanese yen gain 2.5% this week, reaching 156 yen per dollar. Some analysts suspect covert intervention by Tokyo or other foreign‑exchange checks, while expectations of a Bank of Japan rate increase are also building. Market pricing suggests a roughly 75% chance of a BOJ move this month, with a potential 30‑basis‑point tightening by October—either a larger single hike or a rare back‑to‑back increase.
Tech spotlight
In technology news, OpenAI unveiled Astra, its latest large language model, which the company claims can handle most laptop‑level tasks. The announcement could have implications for productivity tools and the broader AI ecosystem.
Key data to watch Friday
- UK S&P Global Purchasing Managers’ Index (PMI)
- Eurozone retail sales for July
- U.S. non‑farm payrolls for August
Investors will be closely monitoring these releases, but the consensus remains that the August CPI report will provide the clearest signal of whether the Fed will pause or raise rates this month.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
