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1h ago

Softer U.S. Inflation and Williams’ Caution Ease Rate‑Hike Bets

A softer PCE combined with cautious Fed guidance reduced near‑term odds of another hike while high oil prices and weak U.S. fiscal metrics keep longer‑term yields supported.

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Overview

  • U.S. personal consumption expenditures inflation for August came in below expectations, at an annual 3.4% versus a 3.7% consensus, prompting immediate market relief.
  • New York Fed President John Williams said there is no urgency for another rate increase now but left open a possible additional hike by year‑end if incoming data match his outlook.
  • After the PCE print and Williams’ comments, Treasury yields fell and U.S. stocks opened higher, with market‑implied odds of an October hike dropping to about 35%.
  • Brazilian assets rallied on the softer U.S. inflation signal combined with pre‑election optimism, lifting the real, boosting the Ibovespa and pushing local rates lower.
  • Despite the near‑term easing, oil trading above $100 a barrel and U.S. public debt exceeding $40 trillion remain tangible upside risks for inflation and longer‑dated yields, keeping policy decisions data‑dependent.