TMGM Daily Market Breakfast: 12 September 2026

Morning Snapshot

• U.S. August CPI held at 3.4% year on year, while core CPI rose 0.3% on the month and eased to 2.4% annually, keeping next week’s Federal Reserve decision in sharp focus.
• U.S. Treasury yields eased after the inflation release, with the 10-year yield down 1 basis point to 4.951% on the day but still more than 16 basis points higher on the week.
• The U.S. Dollar Index retreated from its post-CPI high and closed the week near 99.00 as lower long-dated Treasury yields offset support from firmer monthly core inflation.
• The European Central Bank raised its three key policy rates by 25 basis points, taking the deposit rate to 2.50%, and signalled that inflation risks remain tilted to the upside.
• The Japanese yen strengthened, with USD/JPY falling 0.54% to around 153.60 after briefly touching 154.49, as markets focused on the Bank of Japan’s policy meeting next week.
• Several bank research notes pointed to a 25 basis point Bank of Japan rate increase to 1.25% next week, with expectations centred on a gradual tightening path rather than a larger move.
• WTI crude traded near $97.00, about 3.4% lower and on track for its first decline in five sessions, as talk of a Strait of Hormuz shipping arrangement eased some supply concerns.
• Attention is turning to a central-bank-heavy week ahead, with policy decisions due from the Federal Reserve, Bank of England and Bank of Japan.

Market Developments

Fixed Income

U.S. Treasury yields eased after the CPI release, with the 10-year yield down 1 basis point to 4.951% during the North American session, though it remained more than 16 basis points higher over the week.

Foreign Exchange

The U.S. Dollar Index retreated from its post-CPI high and ended near the 99.00 area, while USD/JPY fell 0.54% to around 153.60 after briefly rising to 154.49 and EUR/USD steadied after an initial post-inflation dip.

Energy

WTI crude traded near $97.00, about 3.4% lower on the day and on track for its first down session in five, as discussion of a Hormuz shipping arrangement reduced some immediate supply-risk premium.

Macroeconomics & Central Banks

U.S. Inflation Holds at 3.4% as Core Monthly Reading Runs Firm

U.S. consumer inflation was unchanged at 3.4% year on year in August, in line with expectations, while prices rose 0.4% on the month after a 0.1% increase previously. Core CPI, which excludes food and energy, rose 0.3% on the month, above the 0.2% forecast, while the annual core rate eased to 2.4% from 2.5% in July.

The data produced a mixed market reaction. The firmer monthly core reading initially supported the U.S. dollar, but that move faded as broader markets reassessed the report. Gasoline prices accounted for more than one-third of the monthly increase in headline CPI, underscoring the role of energy in the latest inflation print.

The inflation release kept attention fixed on next week’s Federal Reserve decision, with the data reinforcing the view that policy remains at the centre of market pricing.

Treasury Yields Ease but Finish the Week Higher After CPI

U.S. Treasury yields fell during the North American session after the inflation data, but remained on course for a higher weekly close. The 10-year Treasury yield was down 1 basis point at 4.951%, yet still up more than 16 basis points, or 3.49%, over the week.

The move in yields helped pull the U.S. Dollar Index back from its post-CPI high. The index reversed earlier gains on Friday and closed the week near the 99.00 zone, little changed on the day, as the pullback in longer-dated yields offset support from the stronger-than-forecast monthly core CPI reading.

ECB Delivers 25 Basis Point Hike and Keeps a Hawkish Bias

The European Central Bank raised its three key policy rates by a further 25 basis points at its 10 September meeting, lifting the deposit facility rate to 2.50%, the main refinancing rate to 2.65% and the marginal lending rate to 2.90%.

Officials signalled that inflation is set to remain above target for an extended period, with policymakers citing continued pressure from the Middle East-driven energy shock. President Christine Lagarde described the decision as unanimous and a “no brainer”, while the ECB also warned that the outlook remains highly uncertain, with upside risks to inflation and downside risks to growth.

The central bank revised its baseline inflation projections higher for 2027 and 2028, while 2026 was unchanged. Baseline real GDP growth projections were revised higher for 2026 and 2027, with 2028 unchanged. The policy message left October described as a live meeting, even as some economists still see December as the more likely timing for any further move.

Bank of Japan Tightening Expectations Support the Yen Ahead of Next Week’s Meeting

The Japanese yen strengthened after the U.S. inflation release failed to sustain the dollar’s initial rebound, with USD/JPY falling 0.54% to around 153.60 after briefly rising to 154.49.

Markets are focused on the Bank of Japan’s policy decision next week, with several research notes pointing to a 25 basis point increase that would lift the policy rate to 1.25%. That would take borrowing costs to their highest level in 31 years.

Analysts broadly described the most likely outcome as a cautious but firm step in the BoJ’s normalisation path. Formal BoJ communication this year has acknowledged that the real policy rate remains negative and needs to rise, while recent commentary has framed 1.1% to 2.5% as a broad nominal neutral-rate range.

Research cited persistent price pressures, stronger wages and solid economic growth as support for a move. Japan’s final second-quarter GDP was reported at an annualised 1.4% quarter-on-quarter seasonally adjusted rate, or 0.9% year on year. Markets will also watch Japan’s August inflation data, with consensus expectations for headline inflation to edge up to 2.0% year on year and core inflation to remain at 1.8%.

Several forecasts also pointed to a gradual path beyond September, with two additional 25 basis point increases in January and April 2027 taking the policy rate to 1.75%, rather than a 50 basis point move or back-to-back hikes at every meeting.

Energy & Commodities

WTI Pulls Back as Hormuz Arrangement Talk Eases Immediate Supply Fears

WTI crude traded near $97.00, about 3.4% lower on the day and on track for its first down session in five, as discussion of a shipping arrangement in the Strait of Hormuz reduced some immediate supply concerns.

Separate market commentary pointed to a gradual increase in Gulf transit volumes, including covert “dark transits”, as an additional factor that could improve supply flows. Estimates cited transit volumes recovering to around 8 million barrels per day by year-end and potentially rising to 12 million next year.

That would mean roughly 13 million barrels per day of oil, out of an original 20 million barrels per day from the Gulf region, could reach the global market. Combined with an average 1.2 million barrels per day increase in oil production outside the Gulf region since the outbreak of the war, the remaining supply shortfall was estimated at about 5.8 million barrels per day.

Upcoming Key Events

• Federal Reserve Policy Decision — null: The Federal Reserve is due to announce its next policy decision in the coming week after August CPI showed headline inflation at 3.4% year on year and core CPI rising 0.3% on the month.
• Bank of England Policy Decision — null: The Bank of England is one of the major central banks scheduled to announce a policy decision in the coming week.
• Bank of Japan Policy Decision — null: The Bank of Japan’s September 17-18 meeting is in focus, with markets and several bank research notes centred on a possible 25 basis point rate increase to 1.25%.
• Japan August Inflation Data — null: Japan will release August inflation data ahead of the Bank of Japan decision, with consensus expectations for headline inflation to edge up to 2.0% year on year and core inflation to remain at 1.8%.