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US Fed: Focus is back on sticky inflation as rate hike probability surged post Fed comments

ICICIdirect Research 04 Sep 2026 DISCLAIMER

At Jackson Hole, Fed Chair Kevin Warsh signalled a distinctly hawkish path. Stressing that sticky core inflation remains "concerning" and declaring the Fed has "work to do" if price trends do not cool quickly, putting interest rate hikes back on the table. As a result, sharp uptick was seen in US Treasury yields, strengthening the US Dollar, driving capital out of emerging markets and pulling down global stock indices. Now, all eyes will be on inflation data to be released on 11th September which may trigger the next move for the risk assets.
Governor Christopher Waller calmed investors by advocating for a pause, arguing the Fed should hold rates steady in the at the upcoming September meeting rather than jumping into a rate hike while still maintaining the concerns. This sparked a relief rally in US stock markets and bullions while temporarily capping the surge in Treasury yields. With an immediate September hike is no longer a given, dip in energy prices may reduce further pressure for rate hikes in coming months.
Lowering immediate hike odds reduces immediate pressure on foreign capital flight, providing relief to the Rupee and domestic equities.

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