Inflation Cooled, And Long-Term Borrowing Costs Rose Anyway

The Federal Reserve's preferred inflation gauge came in cooler than expected on Wednesday, and the cost of borrowing for decades went up anyway, in Washington and in Paris on the same day. Short-dated Treasury bills fell while long-dated bonds sold off, which is the market saying the problem is no longer only what the Fed does next. Then Micron reported the largest quarter in its history after the close, and Asia opened higher on chips while Europe opened lower on banks.

Fast Facts

• A Federal Reserve inspector general cleared former chair Jerome Powell of criminal wrongdoing in the renovation of the central bank's headquarters, closing an investigation that became public in January (Read More)
• $9 billion including debt is roughly what Walgreens' private-equity owner, Sycamore Partners, is discussing with the Weston family for the British pharmacy chain Boots (Read More)
• Madison Square Garden Sports' board approved splitting the Knicks and the Rangers into two public companies on October 26, in a deal structured to be tax-free for shareholders (Read More)
• Bank stress tests are getting a rewrite: the Federal Reserve Board finalized changes meant to make the annual exercise more transparent and to steady how much capital it makes big banks hold (Read More)
• Natural gas futures, which are contracts that lock in a price for delivery later, closed the third quarter 7.6% lower at $3.026 per million British thermal units (Read More)
• The Federal Trade Commission is preparing formal demands for information from OpenAI, Anthropic and other artificial-intelligence companies over safety risks in their products, a shift for an agency that has largely left the industry alone (Read More)

Global News

• Bank of Japan policymakers saw room to raise interest rates faster, a summary of their September meeting showed, as price increases keep running above the central bank's 2% target (Read More)
• Chinese carmakers expect to sell a record 12 million vehicles overseas in 2026, with BYD and Chery pushing hardest into Europe (Read More)
• Unemployment across the countries that use the euro held at 6.4% in August 2026, steady despite higher interest rates and an energy squeeze (Read More)
• Lynas Rare Earths agreed to buy Meteoric Resources for $672 million, a position in Brazil, as governments and miners race to build rare-earths supply outside China (Read More)

Good Inflation News Pulled Short-Term Rates Down And Pushed Long-Term Ones Up

The Bureau of Economic Analysis reported Wednesday that core personal consumption expenditures prices, the inflation gauge the Federal Reserve prefers because it leaves out food and energy, rose 0.2% in August 2026 and 3.0% over the preceding year, against forecasts of 0.3% and 3.3%. Goldman Sachs then pushed its forecast for the Fed's next rate increase from October to December. The Fed's target range is 3.75% to 4.00% after its September 16 increase, and the next policy meeting runs October 27 and 28. Long-term borrowing costs went up anyway.

Yesterday's briefing led with the yield curve, which plots what the government pays to borrow at each length of time, splitting in two. Wednesday split it wider. In the Treasury's published rates for Wednesday, the 3-month bill came in at 4.20%, five hundredths of a percentage point below Tuesday, what traders call five basis points. The 2-year, the maturity that tracks where investors think the Fed is heading, eased a basis point to 4.88%. Then the curve turned. The 10-year note added three basis points to 5.29%, and the 20-year bond, the highest point on Wednesday's curve, added four to 5.68%. The Wall Street Journal put long-dated Treasury yields at their highest since 2002.

None of that is a contradiction. A Treasury bill maturing in weeks is almost entirely a bet on what the Fed does at its next few meetings, so a soft inflation reading pulls its yield down. A bond maturing in decades prices two slower questions: what inflation averages across those decades, and how much debt governments must sell along the way. France's prime minister, Lecornu, needs a 54-billion-euro austerity budget through a divided parliament, and the country's debt office says the government will sell a record 340 billion euros of bonds next year; the extra yield investors demand for holding French government debt rather than German is the widest in 14 years. Indian government bond yields hit a two-and-a-half-year high as the U.S. selloff met heavy borrowing at home. It is the long end of the curve, meaning those long-term costs, that prices a mortgage application, a car loan quote or a student-loan refinance.

Part of August's improvement came from the government's annual revision to how it measures software, legal and financial services, so some of the cooling is a better ruler rather than slower prices. And one bank changing its call is not a decision: the committee has not met. Anyone watching only the Fed is watching half the picture.

Sources: WSJ · U.S. Treasury · Bureau of Economic Analysis · Economic Times on Goldman's Fed call · Economic Times on India · Rapunzl on yesterday's curve · Rapunzl on the September 24 auction

Micron Says The Memory Shortage Runs Into Fiscal 2028, And Korea's Export Data Says It Too

Micron reported after Wednesday's close that revenue for its fiscal fourth quarter, which runs on the company's own accounting year ending in August rather than the calendar one, hit $54.23 billion, up 379% from a year earlier, with adjusted earnings of $33.42 a share. Micron's own forecast for the quarter already underway is roughly $61.5 billion of revenue, against the $57 billion analysts polled by LSEG were expecting, per CNBC, and management said supply should stay tight through fiscal 2027 and fiscal 2028. Thursday morning, South Korea's trade ministry described the same thing from the outside: record September exports of $120.94 billion, up 83.5% from a year earlier, with semiconductor exports of $60.3 billion, up 263%.

Memory is the clearest read on whether artificial-intelligence spending is real, because it is close to a commodity, a product that is basically interchangeable whoever makes it, so its price moves with demand rather than with a brand name. That is why one country's chip exports and one company's revenue jumped together. Korea's ministry credited demand for high-bandwidth memory, which is DRAM, the working memory a computer holds its current work in, stacked in layers to feed artificial-intelligence processors. Supply staying tight through fiscal 2028 is a statement about factory capacity, and that capacity takes years and tens of billions of dollars to build, which is why the reaction ran through Seoul and Tokyo as much as through Boise. Japan's Nikkei 225 rose 2.28% to a six-week high as chip stocks rallied on Micron's guidance.

Memory is also a line item in every phone, laptop and game console, which makes a shortage calendar a consumer-price story: tight supply into fiscal 2028 covers the next couple of product cycles for the devices families buy. Borrowing is getting more expensive at the same moment demand for these chips is getting stronger, and Wednesday's U.S. close showed the split plainly: the Nasdaq Composite rose 0.24% to 26,861.06 while the Dow Jones Industrial Average lost 443.87 points, or 0.86%, to 50,906.05, and the S&P 500 eased 0.25% to 7,651.54. Micron shares, up roughly 275% in 2026 before this report, added about 0.4% in after-hours trading.

Sources: Micron · CNBC · WSJ on South Korea's exports · The Korea Times · Economic Times

Private Hiring Turned Back Up In September, Two Days Before The Number That Counts

Private employers added a net 90,000 jobs in September, ADP reported Wednesday, more than forecasters expected and up from a revised 36,000 in August. Pay for workers who stayed in their jobs rose 3.2% from a year earlier. That follows three months of slowing private hiring, so it is a step up, not a continuation. One caution: ADP counts jobs on the payrolls it processes, while the government surveys about 119,000 businesses and agencies and revises its own numbers later. The two disagree often enough that Wednesday's figure is a hint, not a preview.

The test that counts comes Friday at 8:30am ET, when the Bureau of Labor Statistics publishes September nonfarm payrolls, the monthly count of jobs at companies and government agencies outside farming. Economists surveyed by Bloomberg expect payroll growth near 90,000 and the unemployment rate to stay at 4.1%; Bank of America's published estimate is lower, at 60,000. For scale, August 2026 payrolls rose 162,000, the strongest month since March. So why does one monthly report move the price of almost everything? It is the clearest live example of the Federal Reserve's two legal jobs pulling against each other: stable prices on one side, maximum employment on the other. A hot number is an argument for raising rates again this month, while a cold one hands the argument to the December camp that Goldman Sachs joined on Wednesday. Minneapolis Fed President Neel Kashkari said this week that inflation is still too high and that the data did not change his view.

Sources: WSJ on the ADP report · CNBC · Bureau of Labor Statistics · WSJ on Kashkari · Economic Times · Rapunzl on August's payrolls

What To Watch

Sixteen companies are scheduled to report today, six of them worth more than $2 billion. Accenture is expected before the open, with analysts' average estimate at $3.19 a share against $3.03 a year earlier, and McCormick at $0.75 against $0.85. Nike is expected after the close at $0.43 against $0.49. Four Federal Reserve officials speak between 10:00am and 3:30pm ET, starting with Governor Christopher Waller and ending with Governor Lisa Cook.

Friday is the week's event, with the September employment report at 8:30am ET and four small companies reporting.

Eight companies report Monday, three above $2 billion, with Grifols expected at $0.27 a share against $0.19 a year earlier. The Bureau of Economic Analysis is scheduled to publish International Trade in Goods and Services on Tuesday.

Later this month: the Federal Open Market Committee releases the minutes of its September meeting on October 7, the Beige Book survey of regional conditions lands on October 14, and the next policy meeting runs October 27 and 28. Every earnings figure above is an expectation rather than a result.

The Classroom Takeaway

The Fed sets one interest rate, the overnight rate banks charge each other, and Wednesday showed how little that settles: short-term borrowing costs fell on the inflation news while the price of borrowing for thirty years went up. Where that control ends is most of what you learn from setting the rate yourself.