US inflation data confirms Fed rate hike case as Treasury yields breach 5% threshold

August U.S. Consumer Price Index data came in at 3.4%, meeting expectations and bolstering expectations for a Federal Reserve rate increase. The 10-year Treasury yield briefly surpassed the 5% mark for the first time since 2024, signaling mounting expectations of tighter monetary policy. Goldman Sachs and JPMorgan Chase now forecast a September rate hike as inflation remains sticky.

The bond selloff is reshaping market dynamics, with investors rotating toward safe-haven assets including the Japanese yen and Swiss franc. Currency markets are shifting accordingly, with the dollar strengthening against Asian currencies ahead of key central bank decisions this week.

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