US Markets Find Brief Calm After July Inflation Data

Interest rate markets exhaled following the print, with the probability of a Federal Reserve hike next month dipping just below 50%. Short-term Treasuries gained some stability, even as the government faced the highest yield in nearly two decades during yesterday's 10-year debt auction. The yield curve between two and 30 years saw a marginal steepening.

This relative calm faces an immediate test today with the release of the producer price report, which includes key inputs for the Fed’s preferred PCE gauge, such as airfares. With core and headline PCE inflation expected to remain above 3% for July, and a recent rebound in oil prices threatening August readings, the pressure on central bank policymakers persists. Meanwhile, Brent crude continues to hover just under $90 per barrel, reflecting ongoing energy market tensions.

Global markets have largely settled into an August lull. While Wall Street remains near record highs following recent surges in AI-linked firms, attention has shifted to the UK. Britain’s economy grew by 0.4% in the second quarter of 2026, marking its second consecutive period as the fastest-growing G7 nation. This performance provides a significant tailwind for Prime Minister Andy Burnham ahead of his October budget plan.