The main thing I’m watching ahead of September CPI is the connection between energy prices, inflation expectations, and US Treasury yields.
Middle East tensions have pushed energy prices higher, raising concerns that inflation could accelerate again. But the important question is whether rising energy costs will remain isolated or start feeding into broader inflation.
What the CPI Forecasts Tell Us
Based on the economic calendar figures:
Headline CPI (YoY): 3.6% forecast vs. 3.4% previous
Headline CPI (MoM): 0.6% vs. 0.4%
Core CPI (YoY): 2.5% vs. 2.4%
Core CPI (MoM): 0.3% vs. 0.2%
The headline figures suggest stronger inflation pressure, largely linked to energy costs. Core CPI will be equally important because it helps determine whether inflation is broadening beyond food and energy.
My Outlook on Oil 🛢️
As long as geopolitical risks threaten supply and shipping routes, oil could maintain its upward pressure. However, I wouldn’t chase the rally blindly.
If Brent crude holds its breakout and supply concerns intensify, further upside remains possible. On the other hand, any meaningful de-escalation could unwind part of the geopolitical premium.
What About US Treasuries?
This is where CPI becomes especially interesting.
A stronger-than-expected inflation reading could push Treasury yields higher as traders reassess the Fed’s policy outlook. Higher yields generally pressure existing bond prices, particularly longer-duration Treasuries.
That would create a bearish setup for long-duration bonds. Conversely, softer inflation, especially in core CPI, could ease rate concerns and support a recovery in bond prices.
Still, a hot headline reading driven mainly by energy does not automatically guarantee another Fed hike. The composition of inflation and the broader economic outlook matter.
How I’m Approaching the Release
I’m focusing on three things:
Actual vs. forecast: The surprise matters more than the headline number alone.
Treasury yields and DXY: Their reaction will help show how markets are repricing the data.
Price-action confirmation: I’d rather miss the first move than enter without a clear setup and invalidation level.
My bias is conditional, not fixed. If inflation surprises higher and yields confirm the move, I’ll look for opportunities on the bearish side of long-duration Treasuries. If core inflation comes in softer and yields reverse, I’ll reassess.
The real question is whether the inflation risk is still underpriced or already reflected in the market.
