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Follow Central Banks & RatesRenewed hostilities in the Middle East have led to an increase in oil prices, reigniting inflation concerns. This development has significantly raised expectations for a Federal Reserve interest rate hike in September, with money markets now pricing in a 67% chance. Consequently, the U.S. dollar has strengthened, and benchmark 10-year U.S. Treasury yields have climbed to 4.8%.
Federal Reserve Governor Michael Barr stated in a September 1 speech that the central bank "should act decisively to raise" short-term interest rates if inflation does not trend downward. Barr emphasized the risk of broader price pressures taking hold with inflation above target for a protracted period. This hawkish stance has increased the probability of a quarter-point rate hike at the upcoming September FOMC meeting to 68.2%, according to the CME Group FedWatch tool.
U.S. Treasury Secretary Scott Bessent indicated that Japan's government and central bank are expected to take action to strengthen the yen. These remarks signal a strong possibility of a Bank of Japan (BOJ) interest rate hike in September, leading to a gain in the yen against the dollar.
The Japanese yen steadied near 160 per dollar after U.S. Treasury Secretary Scott Bessent urged the Bank of Japan to raise interest rates this month. Bessent believes Japan's government and central bank will take action to strengthen the yen, signaling a strong chance of a Bank of Japan interest rate hike in September. Japan and the U.S. also agreed to continue coordinating for "orderly" yen moves.
Andrew Bailey, Governor of the Bank of England and Chair of the Financial Stability Board, has cautioned that rapid AI investment, marked by heavy borrowing and concentrated valuations, could threaten global financial stability. He suggests a potential collapse in AI firm valuations might trigger a significant market downturn. This highlights growing concerns about emerging technologies' systemic impact on the economy.
Euro area annual inflation is estimated to have risen to 3.3% in August 2026, up from 2.9% in July, according to a flash estimate from Eurostat. This increase was primarily driven by higher energy prices, which saw an annual rate of 14.3% in August. New research from the European Central Bank (ECB) indicated that the inflation spike since the start of the war in Iran has been almost entirely energy-led, justifying its June interest rate increase and cementing expectations for another hike in September.
U.S. Treasury Secretary Scott Bessent indicated a strong likelihood of the Bank of Japan (BOJ) raising interest rates in September, expecting action from the Japanese government and central bank to strengthen the yen. This follows a record ¥15.4 trillion ($96.4 billion) market intervention by Japan's Finance Ministry over the past month, aimed at combating the yen's weakness, which has contributed to rising import prices and broader inflation. The BOJ previously raised rates in June, and a September hike could fuel market expectations for quarterly rate increases.
U.S. Treasury Secretary Scott Bessent expects Japan to intervene to strengthen the yen, also signaling a potential interest rate hike by the Bank of Japan (BOJ). A weak yen has contributed to increased import prices and broader inflation in Japan, posing challenges for policymakers. The BOJ previously raised rates in June, and a further hike could influence market expectations for future monetary policy.