Source: BIT Securities

In the next two days, the United States will consecutively announce the PPI and CPI data for August. Last night, Brent crude oil briefly surpassed $100 per barrel, while WTI also rose to around $95, sounding alarm bells. The transmission of oil prices to the industrial production chain has historically been one of the most direct and reliable leading signals for predicting PPI trends. At the same time, the latest data from the Bank of America Research Institute and NRF/CNBC retail monitoring shows that consumer card spending and retail growth rates are significantly cooling—this means that even if PPI and CPI rise passively this week due to oil costs, the root of inflation seems more like a supply shock rather than overheating demand, and the Federal Reserve's interest rate hike path may not be as straightforward as the market imagines.

1. The escalation of US-Iran conflict: Will oil become this week's market "time bomb"?

According to CNBC and Rigzone reports, Brent crude oil last night hit a high of $100.45 per barrel, up about 2.9% from Tuesday's closing price of $97.92; WTI also climbed to just above $95, with an increase of about 2.4%. The market believes that from a technical perspective, WTI is breaking out of the symmetrical triangle pattern formed since the March high, and the 100-day moving average has crossed above the 200-day moving average. If the current trend continues, a further challenge of the psychological level of $100 is not ruled out.

From the overall supply chain perspective, oil prices were mostly in the $80 range in August, continuously standing above $90 since September, and now have surpassed $100—this is different from the panic pulse when the Israeli-Iranian conflict suddenly escalated in March, causing Brent to spike to around $109 and then gradually fall in the following months. This time, it resembles a steady climb from the July low of $76. Persistently rising oil costs are sufficient to leave significant traces in PPI data in the next 1-2 months through transport, chemical materials, energy input, and other channels.

2. This week's heavyweight: Will PPI and CPI determine the suspense of the September rate hike?

Data from the U.S. Bureau of Labor Statistics shows that the PPI in July rose by 4.7% year-over-year, and the core PPI (excluding food, energy, and trade services) also increased by 4.7% year-over-year, with a core month-on-month jump of 0.4%, showing a structural feature of “overall flat, core strengthening”. The PPI for August will be published on September 10 at 20:30 Beijing time. Considering the lagging transmission effect of oil costs, the market is generally cautious about this data. Forward-looking institutional analyses indicate that there is a risk of the core PPI (excluding food and energy, previous value in July was 4.2%) rebounding to around 4.6%. If this materializes, it would indicate that PPI, after a brief retreat, is turning upwards again and may drive the overall PPI year-on-year to rise above 5%.

Following closely, the CPI for August will be published on September 11 at 20:30 Beijing time. The CPI in July was 3.4% year-over-year, and the core CPI was 2.5%; street expectations indicate that the overall CPI for August is likely to remain unchanged at 3.4%, but the core CPI is expected to slightly decline to 2.4%. This seems to contradict the logic of rising oil prices—the core CPI already excludes the energy component, and the transmission of oil price increases has a natural time lag. However, it is worth noting that the Bureau of Economic Analysis (BEA) recently announced it will adjust the statistical methods for investment advisory services, legal services, and software categories. Both Goldman Sachs and JPMorgan measured that this adjustment may mechanically lower the core PCE reading by 0.1-0.2 percentage points. In other words, core inflation “looks more moderate,” partly due to changes in statistical definitions rather than genuine price pressure alleviation, which is something that needs to be interpreted carefully when analyzing data released on Friday.

3. Are consumers beginning to "tighten their wallets"? The answers from card usage and retail data

If PPI and CPI are the "thermometers" of price trends, then residential consumption data is the key evidence to judge whether this round of inflation is driven by "overheated demand" or "cost-push". The latest "Consumer Check" report from the Bank of America Research Institute shows that the total year-over-year growth rate of residential credit and debit card spending has dropped from 6.3% in June to 5.0% in July. Excluding gas station spending, it also fell from 5.6% to 4.3%. However, the report emphasizes that this cooling more stems from "temporary factors fading," such as the misalignment of World Cup-related consumption and online promotions, rather than a comprehensive weakening of demand—July's 5.0% year-on-year growth is still among the top three readings over the past three years, exceeding four times the full-year average for 2025.

Meanwhile, the CNBC/NRF retail monitoring data shows that July was the tenth consecutive month of positive growth in retail sales, but the slowdown is more pronounced: the year-on-year growth rate of retail sales excluding automobiles and gas stations fell sharply from 9.41% in June to 5.15% in July; if we further exclude dining expenses, the core retail year-on-year growth rate dropped from 10.08% to 4.72%, a decline of over 5 percentage points.

 4. Federal Reserve's Warsh vs Waller: How much suspense is left for the September 17 interest rate meeting?

Federal Reserve Chairman Kevin Warsh's speech at the Jackson Hole Global Central Bank Annual Conference on August 28 took a clearly hawkish tone, suggesting that persistently high inflation may need to be addressed with interest rate hikes. The market widely interpreted this as greatly increasing the probability of a rate hike in the September meeting. However, Federal Reserve Governor Christopher Waller stated on September 3 that if the recent "anti-inflation" trend can continue, he tends to support keeping rates unchanged in September—this has created a divergence in market expectations before the meeting.

Whether the final decision in the early hours of September 17 (Beijing time) is to raise rates or to “stay put + a hawkish statement,” the directional shift is already quite clear: the Federal Reserve's policy narrative is shifting from “no more rate hikes this year” to “not ruling out further tightening.” When viewed alongside the earlier mentioned core PCE statistical adjustment, it also indicates that within the Federal Reserve's “data-dependent” decision-making framework, the interplay between different sub-datasets, and different statistical definitions will itself become a variable affecting market expectations.

5. UBS in a major turnaround: From "no rate hikes for the whole year" to bullish on two rate hikes, what assets do giants favor?

It is noteworthy that UBS analysts have abandoned their previous stance of no rate hikes throughout 2026, instead forecasting that the Federal Reserve will increase rates by 25 basis points in both September and December, raising the federal funds rate target range to 4.00%-4.25%. A key judgment in the UBS report is: "Tightening amidst resilient GDP growth, robust AI capital expenditures, and a stable labor market has historically supported risk assets," which is essentially different from a scenario of being forced to hike rates to combat inflation in a backdrop of weak economic growth—UBS believes current conditions are closer to the former, i.e., "growth-driven rate hikes," rather than "inflation-driven rate hikes." Based on this judgment, UBS's asset allocation recommendations are as follows:

Equities: Maintain a constructive view on equity assets over the entire rate hike cycle, continuously favoring three themes: artificial intelligence, electricity/resources, and longevity, and view short-term volatility as an opportunity to invest at lower prices.

Bonds: Raise the forecast for U.S. Treasury yields, with the two-year yield target raised to 4.25% (June 2027) and the ten-year yield raised to 4.5%; while the relative attractiveness of short-duration bonds has somewhat decreased, high-quality bonds of medium to long duration still hold allocation value, providing both coupon income and serving as a hedge in periods of slowing economic growth.

U.S. Dollar: Increased tightening expectations are positive for the dollar in the short term, but UBS also warns that if subsequent rate hikes prove to be "inflation-driven" rather than "growth-driven," this support may be difficult to sustain.

Disclaimer:This article is a compilation and analysis of market public information, intended for general informational reference only, and does not constitute any investment advice, securities recommendations, financial or tax advice, nor does it constitute an offer, solicitation, or recommendation in any jurisdiction.

The data referenced in this article includes publicly available information from the U.S. Bureau of Labor Statistics (BLS), the U.S. Bureau of Economic Analysis (BEA), the Bank of America Research Institute's "Consumer Check" report, CNBC/NRF retail monitoring, CNBC, Rigzone, the Federal Reserve's official website, and research reports from third-party institutions. The opinions, predictions, and calculations of third-party institutions involved in this article reflect their own positions and do not represent the views or judgments of BIT; BIT has not independently verified the accuracy, completeness, or timeliness of these opinions.

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