BDO: Markets and Monetary Policy Developments - August 2026

BDO AG, an auditing and consulting firm, released its monthly "Risk Insight" report in September 2026, detailing market and monetary policy developments for August 2026. The report indicates a significant rise in global bond yields. The U.S. Treasury has begun repurchasing its own long-term bonds, and the Federal Reserve Chair adopted a more hawkish stance at the Jackson Hole symposium than in previous statements.

The primary monetary policy event in August was the Fed Chair's keynote address at the Jackson Hole Economic Policy Symposium. Significant market movements were also triggered by the U.S. Treasury's intervention in the long bond market and a renewed flare-up in tensions between Iran and the U.S., reigniting debates about energy-cost-driven inflation.

In the Eurozone, inflation (HICP) increased to 3.3% in August from 2.9% in July. Despite a slight easing in core inflation, markets are now pricing in a high probability of an interest rate hike from the European Central Bank (ECB) in September. German inflation also rose to 2.9%. While the ECB's Governing Council does not meet until September, market expectations are leaning towards rate increases.

In the United States, July's Consumer Price Index (CPI) showed a slight decrease. However, Fed Chair Kevin Warsh emphasized at Jackson Hole the need for continued efforts to combat inflation. Governor Barr's subsequent comments indicated support for decisive rate hikes if inflation does not moderate, increasing the likelihood of a September rate increase.

Broader markets saw renewed concerns over energy costs due to the Iran-U.S. escalation. However, equity markets demonstrated resilience, and gold experienced substantial volatility. European equities reached new highs before a more cautious sentiment emerged towards month-end. Cryptocurrencies also saw a sharp rebound.