Al-Watani: Investors reassured by the Fed's seriousness
A report by National Bank of Kuwait indicated that intense central bank meetings dominated global market movements, as policymakers tightened their response to inflationary pressures stemming from rising energy prices.
The Federal Reserve raised interest rates for the first time in over three years to a range of 3.75%–4%, signaling the possibility of further hikes before the end of the year. The decision was supported by consumer price index readings that exceeded expectations, with the core index rising 0.3% month-on-month against forecasts of a 0.2% increase, confirming the persistence of inflationary pressures.
The report added that members of the Federal Open Market Committee were divided on 2027 forecasts: eight members anticipated another rate hike, six expected rates to remain unchanged, and four predicted a cut. Markets had begun pricing in higher interest rates well before the decision was announced. Yields on 10-year Treasury bonds rose by approximately 25 basis points since Federal Reserve Chair Jerome Powell’s comments at Jackson Hole on August 28, and by a full percentage point compared to their lows in February, while two-year bond yields saw an even larger increase. Treasury yields fell following the announcement, suggesting investor confidence in the Fed’s seriousness in tackling inflation.
The report noted that the Bank of England kept its main interest rate unchanged at 3.75%. The Bank clarified that global energy cost increases have so far had a limited impact on pricing and wage mechanisms in the United Kingdom, but warned that prolonged volatility could increase the likelihood of needing to raise interest rates to bring inflation back to the 2% target.
Annual inflation in the UK rose to 3.1% in August 2026, up from 2.9% in July, marking a five-month high and aligning with market expectations. The increase was primarily driven by transport costs, as inflation in this sector accelerated to 4.6% due to sharp rises in gasoline and diesel prices, pushing motor fuel inflation to 23.0%. Inflation also accelerated in housing, household services, communications, and recreation and culture sectors, while food price inflation remained stable at 1.3%. Core inflation held steady at 2.6%, with goods inflation rising to 2.7% and services inflation remaining at 3.4%. On a monthly basis, consumer prices rose by 0.5%, recording the strongest increase in four months and matching expectations.
Japanese exports continued their upward trajectory, supported by strong demand for semiconductors.
