Strong CPI Print Sparks Rate Hike Frenzy Ahead of FOMC Meeting

The inflation narrative has taken over after September's strong CPI print.

Last week, rate hike odds were near 45%, but following Iran's strikes on shipping near Hormuz and a jump in wholesale prices, expectations soared to 70% by Wednesday.

However, the CPI release on Friday brought mixed results. While it met consensus with a 0.4% m/m increase in headline inflation and 3.4% y/y, core inflation missed by a tenth at 0.2% m/m, sending 10-year bond yields to 4.99%, but not holding above 5%.

This has markets preparing for the FOMC Meeting on September 15-16, with traders giving around 87% odds of a one-step hike in September and anticipating potential hawkish statements that could push yields back through 5%, gold to $4,300, and Nasdaq to 26,200.