The Federal Reserve raised its benchmark interest rate on Wednesday, its first increase in more than three years, and signaled that another move is likely before the end of 2026. Officials pointed to inflation that has stayed elevated for 65 months, pushed higher by oil prices after the closure of the Strait of Hormuz. Chairman Kevin Warsh has argued the central bank must show it can return inflation to target. Treasury yields had already climbed toward 5 percent before the decision. The hike lifts costs on credit cards, auto loans and variable-rate debt, and raises financing costs for companies funding data centers and factories.
The 10-year US Treasury yield rose above 5% on Monday for the first time in nearly three years, as energy prices tied to Middle East supply disruptions kept inflation pressure high. The Federal Reserve meets on September 15-16, and traders now price roughly an 80% to 90% chance of a rate increase, up sharply from a week earlier. Goldman Sachs chief economist David Mericle wrote that pricing is high enough that the committee will likely want to avoid the market reaction that would follow from holding steady. Asian shares and US stocks fell as investors weighed higher oil, higher yields and slower AI spending.
Saudi oil buyers and traders say the kingdom will run out of crude stocks available for export if its East-West pipeline to the Red Sea is not restarted within days. The line has been shut since attacks last week, and Iran denies involvement. Brent crude crossed $107 a barrel on Monday, near a four-month high, while US diesel has hit a record $6 a gallon. The White House is weighing emergency powers to expand refining capacity, and August inflation data has hardened expectations of a Fed rate rise.
JPMorgan Chase has ended its lending relationship with Situational Awareness, the AI-focused hedge fund run by former OpenAI researcher Leopold Aschenbrenner, after large losses on concentrated bets tied to AI infrastructure. The fund had to sell most of its public equities to Ken Griffin's Citadel during a broad selloff in global chip stocks. It managed as much as $45 billion at its peak. Goldman Sachs, Citigroup and Bank of America remain brokers. The episode shows how quickly leverage can turn an AI conviction into a forced sale.
US consumer prices rose 3.4% in the 12 months to August and 0.4% from July, the Bureau of Labor Statistics reported, matching forecasts but keeping inflation well above the Federal Reserve's 2% target. Core prices, which exclude food and energy, rose 2.4% on the year. After the report, traders using CME FedWatch put the odds of a quarter-point hike at the September 16 meeting near 90%, up from about 70%. EY-Parthenon switched its call from a hold to a 25 basis point hike that would lift the funds rate to 3.75%-4%. It would be the first increase since 2023.
Oil prices moved above $100 a barrel as fighting in the Middle East widened, with Bloomberg reporting crude topping $109 at one point. Global bond yields jumped to multi-year highs and stocks in the United States and Europe slumped on Thursday as investors priced in a longer conflict and faster inflation. The dollar also gained as money moved toward safer assets. Companies continued to spend on AI capacity: Microsoft plans to build data-center capacity to about 38 gigawatts by 2032, more than triple its current footprint. Electric vehicle demand rose for a sixth straight month in August, led by Europe, according to Benchmark Mineral Intelligence.
China is putting 360 billion yuan, about $53.6 billion, into eight state-owned banks and insurance companies to strengthen its financial system as growth slows. The injection is led by the finance ministry and was announced by state news agency Xinhua. The Global Times said the capital will give institutions more resources to channel into credit for the real economy and strengthen their ability to withstand external shocks. The money gives the eight groups more room to absorb losses and keep lending, as banks face narrowing margins and rising bad loans tied to property and local government debt. Analysts say the funds may ease short-term pressure but will not on their own revive credit demand.
Global oil prices topped $100 a barrel this week for the first time since July, after U.S. forces destroyed five Iranian tankers carrying crude oil. U.S. Central Command said the strikes were a response to two attempts to hit a U.S. Navy warship with ballistic missiles in as many days. Iran has vowed retaliation, and the White House has threatened a stronger response. Crude is up more than 12% over the past month as the standoff around the Strait of Hormuz, a waterway that carries about one-fifth of the world's oil, keeps traders on edge. Analysts say shipping insurance costs are climbing, and higher energy prices now complicate the inflation picture for central banks as consumers face rising fuel costs.
Canada's counter-tariffs on American goods took effect at 12:01 a.m. on September 8, covering more than 700 US products worth about US$19.9 billion. Ottawa set rates of 15, 25 and 50 percent to match, dollar for dollar, the tariffs Washington placed on Canadian goods under Section 338 and Section 232 of US trade law. The move responds to a 50 percent US levy on about CA$20 billion of Canadian exports. Prime Minister Mark Carney said retaliation was unavoidable, while US Trade Representative Jamieson Greer said no new talks are planned. The measures hit US steel, dairy, electronics and other sectors, and end the arrangement that had exempted most cross-border trade from tariffs.
After-tax wage growth for lower-income US households reached 4.7 percent in August, outpacing the 3.5 percent recorded by higher-income households, according to the Bank of America Institute's monthly employment report. The figures flip the long-standing "K shape" of the recovery, in which high earners pulled ahead while lower earners lagged. Overall hiring cooled during the month, with estimated payroll growth slowing to 1.5 percent year over year from 1.8 percent in July. Bank of America economists said the data still points to a broadly resilient labor market, even as momentum fades, and separate institute data showed small-business hiring strengthening over the summer.