US Inflation Keeps Fed Hike in Focus

• US core CPI rose 0.3% m/m in August, above the 0.2% consensus, while headline inflation increased 0.4%. Markets now price around an 87% chance of a September Fed hike.
• Services inflation remained sticky despite subdued core goods prices, while elevated energy costs continue to cloud the outlook. The 2-year Treasury yield rose 4bps to 4.63%, while the 10-year held near 4.97%, reinforcing that Fed hike expectations are driving the short end.
• Iran is expected to unveil a temporary shipping agreement through the Strait of Hormuz today, following talks with Oman and Abu Dhabi. Any improvement in shipping flows could provide some relief to oil prices after recent supply-driven gains.
• Higher global rates continue to feed into Australia, with markets pricing around a 77% chance of a September RBA hike. Deputy Governor Sarah Hunter speaks Thursday, with any policy guidance closely watched ahead of the meeting.