Markets Pause for Breath: Cooling Inflation, a Divided Fed, and the Countdown to Jackson Hole

ALS Capital Group — Weekly Macro Briefing, 13 August 2026

Every so often the market gives you a week where the data, the politics, and the price action all point in roughly the same direction. This is one of them. US inflation is cooling, the Federal Reserve is visibly split on what to do about it, and everyone from London to Los Angeles is already circling one date on the calendar: 27 August, when Fed Chair Kevin Warsh takes the stage at Jackson Hole.

Here's what mattered this week — and why it matters for the weeks ahead.

Inflation Is Finally Behaving

July's US CPI print landed exactly where economists expected: 3.4% year-on-year, up a modest 0.1% on the month. The more closely watched core figure — which strips out food and energy — came in at 2.5% annually, its lowest reading since February. That's the second soft inflation print in a row after a flat June, and together they tell a consistent story: the energy-driven price spike that rattled markets earlier this year is losing steam.

The details back this up. Energy prices actually fell 1.5% on the month, with gasoline down nearly 3%. Shelter costs, which have been the stickiest part of the inflation puzzle for years, rose just 0.1% — modest by recent standards, though still responsible for two-thirds of the monthly increase. Gasoline is still up almost 25% year-on-year from the highs of the conflict-driven spike, but the trajectory is unmistakably lower.

Gold responded the way it usually does when the inflation panic starts to fade and rate-cut hopes creep back in — it pushed toward $4,400 an ounce, near a ten-week high.

A Fed That Can't Quite Agree

If the inflation data is cooling, the Federal Reserve's internal temperature is not. The July FOMC meeting ended in a 9-3 vote to hold rates at 3.50–3.75%, with three committee members — a notably hawkish contingent — dissenting in favour of an immediate hike. Chair Warsh's post-meeting statement offered almost nothing new, essentially repeating June's language rather than giving markets the guidance many were hoping for.

Markets didn't love the ambiguity. The Dow fell over 1,150 points that day, its worst single session since April 2025 — a reminder that in this environment, silence from the Fed can be read as hawkish just as easily as a hike itself.

Since then, the picture has shifted meaningfully. A weak July jobs report, combined with those two soft CPI prints, has done real work on market expectations. The probability of the Fed holding rates steady at its September meeting has climbed to roughly 42%, according to CME's FedWatch tool — a dramatic reversal from the 14% hold probability priced in just weeks earlier, when a hike looked all but certain.

The Oil Wildcard: Hormuz Still Closed

Away from the inflation and rates story, the geopolitical backdrop remains unresolved. Earlier in August, hopes rose sharply when reports suggested the "perimeters" of a US-Iran deal had been agreed — oil prices fell more than 5% in a single session on the news, and OPEC+ moved to approve a modest production increase.

That optimism has since stalled. A senior Iranian official confirmed this week that Washington and Tehran remain at an impasse over the terms of a lasting settlement, with no progress on reviving the interim framework. Crucially, the Strait of Hormuz — one of the world's most important oil choke points — remains closed. That keeps a real supply-risk premium embedded in crude prices: Brent is trading near $82.50 and WTI around $78.80.

This is worth watching closely. A genuine breakthrough in negotiations, or conversely a further escalation, would ripple straight back through the inflation data that's currently driving the "rate hold" narrative. Cooling CPI prints are easier to sustain with oil behaving itself.

What's Left on the Calendar

The next fortnight is data-heavy. This week brings July producer prices and jobless claims — PPI in particular is worth watching, since it often previews where consumer inflation is headed next. Friday brings the University of Michigan's consumer inflation expectations survey, a metric the Fed watches closely as a gauge of whether the public still believes inflation is under control. UK GDP data lands the same day, giving markets their first meaningful economic read since the change in UK leadership.

But the date that towers above all of them is 27–29 August — the Jackson Hole Economic Policy Symposium, where Chair Warsh is expected to deliver his most substantive policy remarks since taking the podium after July's meeting. Markets are treating this as the real tell for September: a dovish tone would likely cement the current "hold" narrative and give risk assets — and gold — further room to run. A hawkish surprise would send expectations right back toward a September hike, unwinding much of the repricing seen since the weak jobs report.

Then comes August CPI on 11 September, the last major data point before the Fed's 15–16 September meeting — the live decision itself.

The Bottom Line

Inflation is cooling, but not without caveats. The Fed remains divided rather than settled. Oil markets are holding a geopolitical risk premium that could unwind or intensify with little warning. And the single biggest signal of the next six weeks — Warsh's tone at Jackson Hole — hasn't happened yet.

For now, the message is patience: let the data keep confirming (or contradicting) the disinflation story, watch Hormuz closely, and treat Jackson Hole as the moment the picture properly comes into focus.

This briefing reflects ALS Capital Group's internal macro research and is intended for general informational purposes only. It does not constitute financial advice. Past performance and market commentary do not guarantee future results.