Markets are entering a decisive week where inflation data and central bank moves could set the tone for the rest of September. Traders are balancing optimism about rate cuts with the reality that inflation may not be fully tamed. Here’s what you need to keep on your radar:
1. U.S. Inflation Report – Wednesday, Sept 11
All eyes are on the August Consumer Price Index (CPI). Inflation cooled slightly in July, but forecasters think we could see a small pickup this time, landing around 2.9% year-over-year. For the Fed, the stakes are high: a softer number would give them cover to deliver the long-anticipated rate cut next week. But if inflation proves sticky, markets could be in for a reality check.
Traders should expect volatility—Treasury yields and the dollar will be first to react, while equities could wobble if the report complicates the dovish narrative Wall Street has been leaning on.
2. European Central Bank Decision – Wednesday, Sept 11
Just hours after U.S. CPI, the ECB takes center stage. The bank has been steadily easing since last year, but inflation in Europe has ticked slightly above the 2% target, and growth has held up better than feared. That means policymakers are likely to pause rate cuts for now.
The real story isn’t the decision itself—it’s the messaging. If Christine Lagarde hints that more cuts are still possible later this year, the euro could come under pressure. A steadier, more balanced tone would signal the ECB is done easing, at least for now.
3. U.S. Consumer Sentiment – Friday, Sept 12
To close out the week, we’ll get a pulse check on the American consumer from the University of Michigan’s survey. Confidence has been sliding, with last month’s reading hitting its lowest level of the year. Shoppers are feeling the pinch of higher borrowing costs, and their inflation expectations have crept up.
If sentiment weakens further, it could reinforce fears that households are pulling back just as we head into the critical holiday season. Stronger-than-expected resilience, on the other hand, might soften recession worries.
The Bigger Picture
With both U.S. CPI and the ECB decision landing on the same day, midweek could bring fireworks. If inflation surprises on the high side, traders may need to rethink how smooth the road to rate cuts will be. Add in consumer sentiment at week’s end, and this week could end up being a turning point for risk appetite heading into fall.
