9-15-26: Inflation Returns, Raising the Odds for a Key Fed Rate Increase

by Louis Navellier

September 15, 2026

Last Thursday, the European Central Bank (ECB) raised its key interest rates 0.25%. This ECB rate hike put pressure on the Fed to raise interest rates this week, since big central banks tend to move in tandem.

On the same day of the EU’s rate increase, the Labor Department announced the Producer Price Index (PPI) rose 0.4% in August, in-line with economists’ consensus estimate, but the core PPI, excluding food and energy, rose only 0.2%, below the consensus estimate of a 0.3% increase.  However, the July core PPI was revised up to +0.3%. Unfortunately, August wholesale goods prices rose 1.1%, while wholesale service costs rose only 0.1%. Wholesale food prices rose 0.1%, while energy prices soared by 4.2%.

Since the PPI data for August only included prices up to August 11, Bloomberg reported that this PPI report did not include the recent surge in diesel prices. Treasury yields rose in the wake of this PPI report, which will put more pressure on the Fed to raise key interest rates when they meet today and tomorrow.

On Friday, the Labor Department announced the Consumer Price Index (CPI) rose 0.4% in August, in-line with economists’ consensus forecasts. The core CPI, excluding food and energy, rose 0.3%, higher than the economists’ consensus forecast of a 0.2% increase. Energy prices rose 2.1%, while food prices rose only 0.1%. Shelter costs (owners’ equivalent rent) rose 0.3% in August, up from 0.1% in July. Goods prices, excluding food, energy and commodities, rose 0.1% in August. In response, the 2-year Treasury yield rose after the CPI report, reflecting the more likely (85%+) chance of a key rate increase this week.

More Trouble Erupts in the EU Economy

Despite high energy costs and rising interest rates in a recessionary environment, the eurozone said retail sales declined 0.6% in July, substantially worse than the expectations of a 0.3% increase. Germany’s retail sales plunged 3.4% in July, while Spain’s retail sales dropped 0.9%. Spain was previously the hottest economy in the eurozone, so the outlook for economic growth in the eurozone is now grim.

There have also been thousands of protestors in major Spanish cities protesting the open immigration policies of Prime Minister Pedro Sanchez. In the wake of the influx of more than 70,000 migrants on the island of Ceuta, a tiny Spanish enclave on the north coast of Africa, Spanish citizens now fear their nation will be overrun by wave after wave of immigrants straining government resources. Spain’s Opposition Party is calling for Prime Minister Sanchez’s resignation after accusations of deception regarding the migrant problem, which has become increasingly overwhelming. Prime Minister Sanchez is blaming Moroccan authorities for the migrant crisis, as well as the European Union (EU) by demanding Frontex, the EU’s border agency, set up permanent operations in Ceuta and the coastal territory of Melilla.

There is also a political earthquake brewing in Germany after the Alternative for Germany (Afd) Party won a regional election in Saxony-Anhalt, where the Afd Party won 43.8% of the vote and is expected to control 39 of the 83 seats in parliament. The other political parties in Germany have largely excluded the Afd Party from any coalition governments, but the Afd Party is becoming too big to be ignored. (German intelligence has designated the Afd Party as “suspected extremist” due to its anti-immigration stance.)

The Afd Party has responded by making the argument that the Green Party (with 8.9% of the Saxony-Anhalt vote) in Germany has been systematically destroying the country’s manufacturing base with high electricity prices. Now that VW and other major manufacturers are in the midst of massive layoffs, the Afd Party is expected to replace German Chanceller Merz’s CDU party, which only received 17.2% of votes in the regional election. In other words, Germany may soon have a new Chanceller. These EU regional elections also carry implications for our upcoming U.S. mid-term elections, in that elections in Germany and Spain demonstrate that it’s still “The economy stupid” as far as most voters are concerned.

Wars in Ukraine and Iran Continue to Drain Europe’s Economic Health

President Trump recently sent a delegation to Russia to try to unwind the war with Ukraine, so clearly the Trump administration is looking to resolve global problems. When Chinese President Xi visits the White House on September 24th, the Trump administration will urge China to agree that Iran must stop interfering with energy supplies. Crude oil prices should be moderating in the upcoming weeks as worldwide seasonal demand ebbs and crude oil tanker transit increases through the Strait of Hormuz.

In the meantime, the U.S. Navy’s blockade since mid-July has been very effective. According to ship tracker Kpler, no Iranian crude oil has passed through the naval blockade. Furthermore, the U.S. struck three Iranian crude oil tanker after missiles were fired at the U.S. Navy. These attacks caused crude oil prices to temporarily spike. Despite these military actions, the war between Iran and the U.S. has evolved into an economic war as Treasury Secretary Scott Bessent imposes a monetary squeeze on Iran.

Last Tuesday, U.S. central command said it destroyed five Iranian crude oil vessels, four in the Gulf of Oman and one near Kharg Island, where 90% of Iran’s oil exports are handled. U.S. central command also said Iran’s Islamic Revolutionary Guard Corps targeted a U.S. Navy warship with ballistic missiles twice in the last two days, as Secretary of State Rubio said, “Iran continues to try to hit U.S. naval ships.”

On Truth Social, President Trump repeatedly talked about Kharg Island, so it will be interesting to see if the U.S. eventually occupies Kharg Island, since the U.S. will then effectively be in control of Iran’s crude oil exports. In the meantime, crude oil reached $100 per barrel, which is unstainable politically, so I expect that if Iran refuses to sign a ceasefire agreement, then the U.S. will seek to control Kharg Island.

Finally, at the end of each quarterly announcement season, we retest how our Stock Grader and 8-factor Fundamental model are performing. I am proud to announce that the Top 20% of Stock Grader (i.e., the A-rated stocks) and the top 60% of our 8-factor Fundamental model (i.e., the A, B & C-rated stocks) are performing exceptionally well, which effectively means that we can now invest more confidently!

Our fundamentally superior stocks normally benefit from quarter-end window dressing in late September, so if you have more capital to invest, the last two weeks of September would be a great time to add market positions. September is normally a weak month, partly due to investors having to raise capital for estimated tax payments due today, September 15th, but the second half of September is usually stronger.