CPI Data Avoids Blowout But Remains Above Fed’s Target

Yields fall after CPI meets estimates and jobless claims rise. UST yields fell to intraday lows in the aftermath of today’s CPI print and weak jobless claims data. CPI came in as expected across most readings, and initial jobless claims (263k in the week that ended September 6th) hit the highest level since October 2021, well above estimates of 235k. The data combined to briefly push 10-year yields below 4% for the first time since April, underscoring market concern of avoiding a labor market downturn outweighing persistent inflation. The 10-year and 30-year yield closed 2-4 bps lower today at 4.02% and 4.65%, respectively, although the front-end and belly of the curve closed nearly flat with the 2-year yield at 3.54%. Meanwhile, all three major equity indices hit all-time intraday highs and closed at record levels.

Underlying US inflation rises in line with estimates. Core CPI, which excludes food and energy, met expectations of a 0.3% rise in August. Headline CPI rose 0.4%, marking the largest monthly increase this year and landing above estimates (+0.3%) and the month prior (+0.2%). The overall CPI increase was largely driven by higher goods prices, which saw their sharpest climb since May 2023. Specifically, new and used cars, apparel, and appliances saw price hikes, with some attributing the rise to tariff-based-inflation, though economists remain divided on the full impact of recent levies. Beyond goods prices, household expenses such as groceries, gasoline, and electricity also rose. Overall, inflation remains elevated with annual CPI up 2.9% and core CPI up 3.1% YoY, lingering significantly above the Fed’s 2% target.

Senate Banking Committee advances Miran’s Fed nomination. Stephen Miran is one step closer to becoming a Fed governor after the Senate Banking Committee voted 13-11 on Wednesday to advance his nomination. Miran will now face the full Senate for consideration, where he is likely to be confirmed given the chamber’s 53-47 Republican majority. Confirmation could come as soon as Monday, though that would still leave little time for Miran to be sworn in ahead of the FOMC meeting beginning next Tuesday. His attendance may prove inconsequential, however, as a rate cut next week is nearly guaranteed. Nonetheless, Miran is a close Trump ally and, if confirmed, is likely to support the President’s goal to lower rates.