Dovish Fed Comments, Yen Intervention Speculation, and Latest Trump Remark on Iran War
September 3, 2026
Federal Reserve Governor Waller and New York Fed President Williams each made remarks casting some doubt about the likelihood of the central bank raising interest rates after its September 15-16 policy review. Waller said the decision is likely to be heavily influenced by the upcoming CPI price data, and Williams noted that a fading impact from higher tariffs will help foster disinflation.
The dollar weakened Thursday. The sharpest slide, a slump of 2.1%,has been against the yen, which benefited from a spike in speculation that coordinated intervention support for Japan’s currency either has been done or is about to happen.
The U.S. currency has also depreciated by 0.7% versus the Swiss franc and sterling, 0.6% relative to the Indonesian rupiah, and 0.3% relative to the Canadian dollar, euro and Australian dollar.
Ten-year sovereign debt yields have declined today so far by seven basis points in the U.K., and Spain, five bps in Italy, France, Japan, and Australia and by three bps in Germany and the United States.
Stock markets closed down 0.2% in Japan and 0.4% in India but strengthened 0.7% in China and 0.8% in Indonesia. European and U.S. share prices have climbed, too, but by less than 1%.
Bigger gains of 2.1%, 1.9% and 1.1% have occurred in the prices for gold, bitcoin, and West Texas Intermediate oil.
President Trump said this week’s bombing campaign in Iran is unlikely to last much longer.
A number of U.S. economic data releases have happened today:
- A goods and services trade deficit of $88.6 billion in August was the largest imbalance since March 2025 when U.S. firms were rushing to build up inventories of imported items ahead of the initial leap in tariffs.
- New jobless insurance claims last week of 206k aligned closely with the prior two weeks of 204k in the week of August 14 and 207k in the week before that.
- Labor productivity in the second quarter was 1.4% above the first quarter level and 2.2% greater than a year earlier. Productivity had increased 2.1% in 2025 and 3.0% in 2024. Unit labor costs, which rose 2.4% in 2024 and 2.2% in 2025, increased 1.4% between the second quarters of last year and this year.
- The S&P Global composite purchasing managers index increased 1.5 index points to a 52-month high of 56.0, its best score in 52 months. The services PMI reading of 56.5 was at a 68-month high.
- The Institute of Supply Management’s non-manufacturing PMI printed at a 6-month high of 55.4. Demand printed at a 48-month high, but the subindex for price pressure accelerated, too, to a four-year peak.
Among the numerous other countries for which composite purchasing manager surveys were reported today, Euroland’s reading of 52.0 was unrevised from a preliminary indication and at an 8-month high. Within the joint European currency bloc, the Italian, Irish and German composite PMIs of 53.6, 55.4 and 51.8 were at 9-, 9- and 5-month highs, but the French reading slid to a 2-month low of 48.5. Japan’s composite PMI score of 53.5 constituted a 6-month high, while China’s of 52.1 was the best in two months. Britain’s PMI of 52.5 was unrevised from its preliminary estimate and at a 4-month high. India’s composite PMI printed at a 2-month high of 54.6, and Russia’s 50.6 reading was a 6-month high. Sweden’s chimed in with a 2-month high of 55.9. Canadian and Brazilian composite PMI readings of 49.8 and 49.1 are a 6-month low and a 2-month high, respectively.
Private sector PMIs in August for Hong Kong (49.5), Lebanon(50.1) and South Africa (50.5) represent a 4-month low, a 3-month low and a 2-month high.
Non-oil purchasing manager indices for Egypt of 49.6 (a 7-month low), Saudi Arabia (a 6-month high of 53.8) and the United Arab Emirates (an 8-month high of 55.3) were also released, as were manufacturing sectors from Vietnam (a 6-month high of 53.3) and Singapore (a 93-month high of 51.5).
Switzerland released both August consumer prices and second quarter GDP. CPI inflation unexpectedly doubled to 0.8%, a two-year high and up from a May 2025 low of -0.1%. Core inflation of 0.4% was the most since March. Swiss gross national product growth accelerated to a quarterly 1.5%, three times as much as in the first quarter and 2.3% when compared to a year earlier, which was the most in five quarters.
Turkish consumer price inflation edged a quarter of one percentage point lower in August to a 5-month low but stayed above 30% at 31.5%. Such had fallen previously from 75.5% in May 2024 to a low point of 30.05% in January 2026. Producer prices leaped 2.6% in August and was associated with a 2-month high 12-month increase of 27.95%.
Producer prices in the euro area jumped 1.6% in July (most in 4 months), raising year-on-year PPI inflation by 1.2 percentage points to 5.8%, just below the 38-month high of 5.9% touched in May. President Trump’s tariff hikes and attempted regime change in Iran have unleashed a double-barreled inflation shock felt in most of the world including his own country.
Central bankers in New Zealand and Malaysia announced monetary policy decisions today that aligned with market expectations. The Reserve Bank of New Zealand’s official cash rate was raised by 25 basis points to 2.75% in follow-up to a similarly-sized initial tightening at the prior policy review in July. Nine previous reductions between May 2023 and August 2024 had lowered the interest rate to 2.25% from 5.5%, but consumer price inflation in New Zealand jumped a full percentage point from 3.1% in 1Q to 4.1% last quarter, well above the 1-3% target range. According to a statement of explanation, “Core inflation, expected wage growth, and inflation expectations remain consistent with inflation returning to the 1 to 3 percent target band by mid-2027 and the 2 percent target midpoint later next year. This decision reduces the risk that the OCR needs to increase by more later. Future policy decisions will depend on the Committee’s judgement of the balance of risks to medium-term inflation.”
At the Central Bank of Malaysia, the key interest rate was left unchanged at 2.75%, the level since a July 2025. Growth is buoyant in Malaysia, yet inflation there remains contained at just 1.8%.
Copyright 2026, Larry Greenberg. All rights reserved.
Tags: Central Bank of Malaysia, Composite purchasing manager surveys August 2026, Euroland PPI, Reserve Bank of New Zealand, Swiss CPI and GDP, Williams and Waller
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