Please see below the daily update article from Brooks Macdonald, exploring how signs of easing US inflation pressures supported markets. It also highlights the recent decline in oil prices. Received on – 14/08/2026.
What has happened?
Investors continued to scale back expectations of a near-term Federal Reserve rate hike, helping the S&P 500 (+0.65%) reach fresh highs. The main catalyst was a softer-than-expected US producer price inflation (PPI) report, which reinforced the message from Wednesday’s CPI release that inflationary pressures may be easing. By the close, markets were pricing just a 35% chance of a Fed rate hike in September, down from more than 50% before the latest inflation data. European markets were less buoyant, however, with the STOXX 600 (-0.04%) slipping for a second consecutive day. This partly reflected Europe’s lower exposure to technology stocks and the fact that expectations for the European Central Bank remained largely unchanged, with investors still assigning a roughly 90% probability to a September rate increase.
Softer PPI print calms rate hike fears
Yesterday’s PPI report strengthened the view that the Fed may not need to tighten policy as aggressively as previously feared. Headline producer prices were unchanged in July, compared with expectations for a 0.2% increase, while annual PPI slowed to 4.7% from the expected 4.9%. The data suggested that the recent energy-driven inflation shock may be losing momentum, providing reassurance that inflation is moving in the right direction. Markets responded quickly, with September rate hike expectations falling immediately after the release.
Oil retreats as geopolitical premium eases
The dovish momentum received further support from lower oil prices, with Brent crude falling -2.15% to $87.07/bbl and snapping a six-day winning streak. Prices recovered from their intraday lows after reports that the Houthis were targeting an Aramco refinery in Saudi Arabia’s Jizan region, while Iranian officials reiterated threats around shipping through the Strait of Hormuz. Nevertheless, in the absence of any material escalation, markets unwound some of the geopolitical risk premium that had built up over the previous week, particularly given continued shipping activity through the region despite the tensions.
What does Brooks Macdonald think?
The market reaction over the past two days highlights how sensitive investors remain to inflation data and the implications for central bank policy. The latest CPI and PPI releases have provided reassurance that inflationary pressures may be easing, helping to reduce concerns about an imminent Fed rate hike. Investors remain cautious about removing the possibility of further tightening altogether, however, as both the August employment report and another CPI release are still due before the next Fed meeting.
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Alexander James Roberts
14/08/2026