Inflation Sticks, and the Fed Has a Decision to Make
September 14, 2026
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Last week delivered the final inflation reports before this week's Federal Open Market Committee (FOMC) meeting, and they did not make the Federal Reserve's (Fed) job any easier. August Consumer Price Index (CPI) rose 0.4% month over month and held at 3.4% year over year, in line with expectations, but core CPI increased 0.3% versus the 0.2% consensus.¹ Core CPI is still running at 2.4% year over year,2 yet Thursday's hotter Producer Price Index (PPI) print widened the wholesale-to-retail inflation gap considerably, raising the question of how long retailers can continue absorbing input costs rather than passing them through.3 Preliminary Michigan sentiment missed at 47.8, with one-year inflation expectations climbing to 4.6%.4 Energy was a key driver as crude pushed past $100 per barrel and continues higher this morning.5 Equities snapped a four-day losing streak Friday but still finished the week lower.6 The S&P 500 Index was down 0.8% alongside the largest weekly equity fund outflows since December 2025.7
Treasuries opened the holiday-shortened week firmer with the long end leading. That strength quickly faded as the oil-driven inflation impulse, combined with a heavy investment-grade issuance calendar and Treasury auctions, pushed short- and intermediate-term yields up faster than long-term rates.8 The result was front-end yields hitting their highest levels since mid-2024.9 The 10-year Treasury moved from 4.78% the prior Friday to 4.97% to end the week.10 Treasury Secretary Scott Bessent's Wednesday announcement of a $6 billion long-dated buyback, above the $4 billion baseline, landed poorly, as the market had positioned for something larger.11
Credit, meanwhile, has been the calm in the storm. The Corporate Index option-adjusted spread closed at 78 basis points (bps), from roughly 80 bps at the highs earlier in the week.12 That stability came in the face of real supply: the week after Labor Day is seasonally among the busiest of the year, and investment-grade borrowers priced $68 billion.13 Year-to-date issuance has now cleared $1.5 trillion, more than 30% ahead of last year's pace, and syndicate desks are penciling in another $55 billion this week.14 The investment-grade corporate index yield of 5.74% is now the highest since April 2024.15
The week ahead is dominated by central banks. The FOMC announces Wednesday whether it will hike rates for the first time this year.16 The market will focus on the press conference for details on this potential hiking cycle. The Bank of England follows Thursday and the Bank of Japan Friday, where a hike is expected—the yen already rallied to a seven-month high on tightening expectations.17,18 On the economic calendar, August retail sales are due Wednesday, with consensus calling for 0.8% following July's 0.6% decline.19 Investors will also receive updates on industrial production, housing starts and the New York and Philadelphia Fed surveys.20
Sources:
1,2U.S. Bureau of Labor Statistics – Consumer Price Index News Release; 9/11/26
3U.S. Bureau of Labor Statistics – Producer Price Index News Release; 9/10/26
4-6Investrade – Market Review: September 11, 2026; 9/11/26
7U.S. News and World Report – US Equity Funds Record Nine-Month High Outflows as Oil Stokes Inflation Fears; 9/11/26
8CNBC – 10-year Treasury yield touches highest since 2023 despite Bessent’s $6 billion bond buyback plan; 9/9/26
9CNBC – Treasury yields remain near multiyear highs as August CPI shows sticky inflation; 9/11/26
10,12,15Bloomberg
11CNBC – Treasury Department to buy back up to $6 billion in longer-term debt, triple the normal level; 9/9/26
13,14Cincinnati Asset Management – Investment Grade Weekly; 9/11/26
16,19,20MarketWatch – Economic Calendar; as of September 14, 2026
17Bank of England – Interest rates and Bank Rate: our latest decision; 7/30/26
18CNBC – Yen hovers near seven-month high, dollar steadies; 9/8/26
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