The 'Super Week' Is Here: Will the Fed Raise Rates?

A 25-basis-point rate hike by the Federal Reserve this week is no longer much of a surprise. August’s nonfarm payrolls rose by 162,000, followed by persistently hot PPI data; last Friday’s CPI report effectively eliminated the last remaining uncertainty: headline CPI rose 3.4% year-on-year and 0.4% month-on-month, while core CPI rose 0.3% month-on-month. Markets now assign over an 80% probability to a 25-basis-point hike this week, with Goldman Sachs and JPMorgan Chase both shifting their forecasts to anticipate a September hike. Yet the complications surrounding this meeting go beyond August’s CPI. Brent crude oil has surged back near $107 per barrel today. With no clear de-escalation in the Middle East and rising transportation costs, if oil prices remain above $100 per barrel—not just spike temporarily—gasoline, transport, and production costs will continue feeding through the economy. That means even if the Fed hikes 25 basis points this week, it will struggle to signal to markets that inflation is once again under control. The U.S. Treasury market has already begun pricing this in. The 10-year yield recently approached 5%, peaking near 4.99% intraday last Friday. At this level, even a modest further rise would significantly intensify pressure on highly valued tech stocks.

Brent Crude Breaks $100 for the First Time Since July; Probability of a September Rate Hike Rises to 60%: The ‘Dovish Narrative’ Shatters on the Eve of the Fed’s Policy Meeting

U.S. equity index futures traded flat on Wednesday: Dow E-minis fell 84 points (0.16%), S&P 500 E-minis were unchanged, and Nasdaq-100 E-minis edged up 0.04%. Morgan Stanley’s Chief U.S. Equity Strategist Mike Wilson warned that “rising oil prices and interest rates remain the key near-term risks to equities,” noting that strategic reserves have been heavily drawn down to cushion oil-price shocks. Policy levers are likewise under strain—the U.S. Strategic Petroleum Reserve (SPR) has fallen to 289.7 million barrels, the lowest since 1982; meanwhile, the Treasury Department is advancing bond-buyback operations to curb the rise in long-dated yields. These multiple pressures are converging in the run-up to the September 11 CPI release and the Fed’s September 15 policy meeting. Hormuz chokepoint disruption worsens; the ‘dovish narrative’ shatters Brent crude has broken above $100 per barrel for the first time since July 24. As a critical maritime chokepoint handling roughly one-fifth of global oil shipments, the Strait of Hormuz normally sees daily throughput of about 18 million barrels—but following the outbreak of conflict, flows have plunged to just 4.9 million barrels per day. Now entering its seventh month, the U.S.-Iran conflict has dashed earlier market expectations of de-escalation and shipping normalization: instead of easing, shipping disruptions have worsened amid renewed escalation at the end of August and early September. As of late August 2026, the U.S. Strategic Petroleum Reserve stands at 289.7 million barrels—the lowest since 1982. Since the onset of the current U.S.-Iran conflict, approximately 58 million barrels—roughly 14% of total reserves—have been released. If releases continue at the current pace, another 39 million barrels would bring the SPR down to approximately 243 million barrels—below the 250-million-barrel threshold considered essential for safe operational capacity. Compounding this is mounting political pressure ahead of the midterm elections, as gasoline prices remain tightly linked to voter sentiment—leaving policymakers with virtually no remaining buffer to dampen oil prices. On the fiscal front, efforts to ‘extinguish’ upward pressure on long-end yields are underway: the U.S. Treasury previously announced plans to purchase more long-dated Treasuries to contain yield increases. Its buyback announcement on Wednesday drew market attention, with JPMorgan analysts noting that some market participants are using it to confirm the scale of the Treasury’s planned repurchases.

Fed Expected to Hike Rates Amid Rising Oil Prices

6 days ago

The Federal Reserve is poised to implement a quarter-point rate hike as oil prices surge past $100 per barrel due to Middle East supply disruptions. Policymakers aim to curb inflation despite political pressure to maintain lower borrowing costs.

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