Sticky US Inflation Keeps Markets Focused on Sept. 16 FOMC, Warsh in Spotlight
Summary
- U.S. inflation is proving more persistent than expected, making the FOMC meeting scheduled for Sept. 16 a key variable for risk assets.
- Despite rising bond yields, New York stocks are holding up, supported by technology shares and expanding artificial intelligence (AI)-related investment.
- With core CPI topping market forecasts, attention is turning to the view that the Fed may struggle to shift to a more accommodative policy stance in the short term, along with the possibility of AI regulation discussions.
Forecast Trend Report by Period
U.S. inflation has remained stickier than expected, sharpening market focus on the Federal Open Market Committee meeting scheduled for Sept. 16. With Treasury yields rising even as New York stocks remain relatively resilient, the direction of monetary policy has emerged as a key variable for risk assets.
U.S. equities have held up recently despite pressure from higher rates, supported by corporate earnings and increased investment tied to artificial intelligence. Demand has remained concentrated in technology shares, helping offset part of the shock from rising bond yields.
The biggest point of interest at this FOMC meeting is the message Federal Reserve Chair Kevin Warsh will deliver. Warsh recently emphasized the importance of price stability at the Jackson Hole meeting, striking a more hawkish tone than markets had expected. Investors are now watching whether he maintains that inflation-fighting stance at this meeting.
Inflation data are also adding to the Fed's dilemma. According to the U.S. Bureau of Labor Statistics, the consumer price index rose 3.4% in August from a year earlier. That matched market expectations, but it still left a considerable gap from the Fed's 2% inflation target.
Underlying price pressure was stronger than expected. Core CPI, which excludes food and energy, rose 0.3% from the previous month, above the market forecast of 0.1%. The data were read as a sign that disinflation is not progressing fast enough, reinforcing the view that the Fed will have difficulty shifting to a more accommodative policy stance in the near term.
Meanwhile, concerns on Wall Street over the risks surrounding the rapid development of AI have resurfaced. Repeated warnings that AI could move beyond human control are also drawing attention to the possibility that regulatory discussions could begin in earnest.
