Brent crude oil breaks through 100 dollars! This week, PPI and CPI are coming in strong, and the suspense of the Federal Reserve's interest rate hike is hard to dissipate

In the next two days, the United States will consecutively release the PPI and CPI data for August. Last night, Brent crude oil briefly broke through $100 per barrel, while WTI also rose to around $95, sounding the alarm. The transmission of oil prices to the industrial production chain has historically been one of the most direct and reliable leading indicators for predicting PPI trends. Meanwhile, the latest data from the American Bank Research Institute and NRF/CNBC retail monitoring shows that consumer credit card spending and retail growth are clearly cooling down—this means that even if this week's PPI and CPI rise passively due to oil costs, the root cause 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. Escalation of U.S.-Iran Conflict: Will Oil Become This Week's "Time Bomb" in the Market?

According to CNBC and Rigzone, Brent crude oil reached a high of $100.45 per barrel last night, up about 2.9% from Tuesday's closing price of $97.92; WTI crude oil also climbed to 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, with the 100-day moving average crossing above the 200-day moving average. If the current trend continues, further challenges to the psychological barrier of $100 cannot be ruled out.

From a comprehensive supply chain perspective, oil prices were mostly in the $80 range in August and have consistently remained above $90 since September, now breaking through $100—this is different from the panic pulse seen in March when the U.S.-Israel conflict suddenly escalated, causing Brent to spike to around $109 before gradually falling over the following months. This time, it resembles a steady rise from the July low of $76. The continuously rising oil costs are sufficient to leave a significant mark in the PPI data over the next 1-2 months through channels such as transportation, chemical raw materials, and energy inputs.

2. Major Events This Week: Will PPI and CPI Set the Tone for September's Rate Hike?

Data from the U.S. Bureau of Labor Statistics shows that the July PPI rose 4.7% year-on-year, with the core PPI (excluding food, energy, and trade services) also at 4.7% year-on-year, and the core month-on-month surged by 0.4%, presenting a structural characteristic of "overall flat, core strengthening." The August PPI will be released on September 10 at 20:30 Beijing time. Considering the lagging transmission effect of oil costs, the market is generally cautious about this data. Forecasts from institutions indicate that the core PPI (excluding food and energy, with a previous value of 4.2% in July) has a risk of rebounding to around 4.6%. If this materializes, it would mean that after a brief decline, the PPI is turning upward again, potentially driving the overall PPI year-on-year above 5%.

Following that, the August CPI will be released on September 11 at 20:30 Beijing time. The July CPI year-on-year was 3.4%, and the core CPI year-on-year was 2.5%. Street expectations indicate that the overall CPI for August is likely to remain flat 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 energy items, and the transmission of rising oil prices has a natural lag; however, it is worth noting that the U.S. Bureau of Economic Analysis (BEA) recently announced adjustments to the statistical methods for investment advisory services, legal services, and software categories. Both Goldman Sachs and JPMorgan Chase estimate that this adjustment could 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 criteria rather than a real easing of price pressures, which requires extra caution when interpreting Friday's data.

3. Are Consumers Starting to "Tighten Their Wallets"? Answers from Credit Card and Retail Data

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

Meanwhile, CNBC/NRF retail monitoring data shows that July marked the 10th consecutive month of positive retail growth, but the slowdown in growth is more significant: the year-on-year growth rate of retail sales excluding automobiles and gas stations plummeted from 9.41% in June to 5.15% in July; if we further exclude dining expenditures, the core retail sales year-on-year growth rate dropped from 10.08% to 4.72%, a decline of more than 5 percentage points.

4. Federal Reserve's Warsh vs. Waller: How Much Uncertainty Remains for the September 17 Rate Meeting?

Federal Reserve Chairman Kevin Warsh's remarks at the Jackson Hole Global Central Bank Annual Meeting on August 28 were clearly hawkish, suggesting that persistently high inflation may need to be addressed with interest rate hikes, which the market interpreted as significantly increasing the probability of a rate hike at the September meeting. However, Federal Reserve Governor Christopher Waller stated on September 3 that if the recent "anti-inflation" trend can continue, he leans towards supporting keeping rates unchanged in September—this has led to a divergence in market expectations ahead of the meeting.

Regardless of whether the final decision in the early hours of September 17 (Beijing time) is to raise rates or to "hold steady with 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 previously mentioned adjustments to the core PCE statistical criteria, it also indicates that the Federal Reserve's "data-dependent" decision-making framework involves a competition between different sub-data and statistical criteria, which itself can become a variable affecting market expectations.

5. UBS's Major Reversal: From "No Rate Hikes This Year" to Expecting Two Rate Hikes—What Assets Do Giants Favor?

Notably, UBS analysts have abandoned their previous stance of no rate hikes for the entire year of 2026, instead predicting that the Federal Reserve will raise rates by 25 basis points in both September and December, bringing the federal funds rate range to 4.00%-4.25%. A key judgment in the UBS report is: "Tightening conducted against a backdrop of resilient GDP growth, robust AI capital expenditure, and a stable job market historically tends to support risk assets," which is fundamentally different from the scenario of being forced to raise rates to combat inflation amid weak economic growth—UBS believes the current situation is 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:

Stocks: Maintain a constructive view on equity assets throughout the entire rate hike cycle, continue to favor three major themes: artificial intelligence, electricity/resources, and longevity, and view short-term volatility as an opportunity to accumulate at lower levels.

Bonds: Raise the forecast for U.S. Treasury yields, with the 2-year yield target increased to 4.25% (June 2027) and the 10-year increased to 4.5%; the relative attractiveness of short-duration bonds has decreased, but high-quality bonds in the medium to long term still have allocation value, providing both coupon income and hedging during economic slowdowns.

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

Disclaimer: This article is a compilation and analysis of publicly available market information 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 cited in this article comes from sources including the U.S. Bureau of Labor Statistics (BLS), the U.S. Bureau of Economic Analysis (BEA), the American Bank Research Institute's "Consumer Check" report, CNBC/NRF retail monitoring, CNBC, Rigzone, the Federal Reserve's official website, and publicly available research reports from third-party institutions. The views, forecasts, and calculations of third-party institutions mentioned in this article are their own and do not represent the views or judgments of BIT; BIT has not independently verified their accuracy, completeness, or timeliness.

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