Monthly economic update — August 2026: Warsh's Jackson Hole inflation warning, an oil spike, and a market that shrugged it off

Two things moved this month more than anything else. On 28 August, Federal Reserve Chair Kevin Warsh used his first Jackson Hole address as Chairman to tell the room — plainly — that US inflation is not yet under control. Three days later, a fresh US military strike near the Strait of Hormuz sent oil spiking again, on the same morning this update went to print. Central bank and statistical agency figures below are taken from primary sources — the Bureau of Labor Statistics, the Australian Bureau of Statistics, the Federal Reserve and the Reserve Bank of Australia; market prices (oil, bond yields, equities, the Australian dollar) are Trading Economics readings taken around midday AEST on 31 August 2026, and will have moved by the time you read this. This is general commentary on economic conditions, not personal financial advice, and shouldn't be read as a recommendation about any investment.

The big picture

Headline inflation actually improved slightly in both the US and Australia through July. On the surface, that's good news. But Warsh's message at Jackson Hole was that the surface number isn't the one that matters, and the bond market and rate-hike odds moved hard on his remarks well before the oil news broke. Then oil moved on top of that — the same Middle East flashpoint that's been feeding into Australian inflation data since mid-year flared up again. Equity markets, oddly, have barely blinked through any of it; US shares are having a strong August.

The throughline is this: the case for the Fed cutting rates any time soon looks weaker at the end of August than it did at the start, and the case for oil settling down looks weaker too.

Inflation: both countries improved on the headline — the detail is less comfortable

United States. "The all items index rose 3.4 percent for the 12 months ending July after rising 3.5 percent for the 12 months ending June," the Bureau of Labor Statistics reported (US Bureau of Labor Statistics, https://www.bls.gov/news.release/cpi.nr0.htm). Core inflation — all items less food and energy — eased to 2.5% over the year, from 2.6%. Shelter rose 0.1% in July, "accounting for roughly two-thirds of the monthly all items increase," and the energy index actually fell 1.5% for the month. That last point is worth sitting with given what's happened to oil since. Look past the single month and the same release records the energy index up 14.7% for the 12 months ending July — so July's fall was a reprieve inside a steep annual climb, not a new trend, and it is already reversing.

Australia. "The Consumer Price Index (CPI) rose 3.5 per cent in the 12 months to July 2026, down from 3.8 per cent in the 12 months to June" (Australian Bureau of Statistics, https://www.abs.gov.au/media-centre/media-releases/cpi-rose-35-year-july-2026). As with June's reading, the underlying number told a quieter story: trimmed mean inflation — the RBA's preferred gauge — held at 3.6%, unchanged from June. Housing was the largest contributor to annual inflation (+5.0%, driven by new-dwelling costs up 5.7%), followed by Food and non-alcoholic beverages (+3.2%, with meals out and takeaway up 4.5%) and Recreation and culture (+2.6%). The line that jumps out, though, is Transport: annual inflation there rose to 1.6%, up from just 0.1% in the year to June, and the ABS was explicit about why. Quoting head of price statistics Rachael McCririck in full: "On a monthly basis, Automotive fuel prices rose 7.5 per cent in July after falling for three months in a row. This was driven by higher world oil prices and the partial unwinding of the federal government's fuel excise relief measures in July."

That second half matters, and it is worth not skating past it. Part of that 7.5% jump is a domestic policy change — excise relief being wound back — rather than the Middle East. So the fuel line in Australia's July CPI is a genuine oil signal and a one-off tax effect layered on top of it, and only the oil half will keep repeating if tensions persist. Even discounted for the excise component, though, the direction is the same one running through the rest of this update, and it was showing up in the numbers a month before this week's spike.

Both countries, then, improved on the headline while the number that actually drives central bank decisions — core in the US, trimmed mean in Australia — sat still or worse.

Warsh's Jackson Hole warning

Kevin Warsh marked his 100th day as Federal Reserve Chairman with his first Jackson Hole address, delivered 28 August at the Kansas City Fed's annual symposium, titled "In Our Time" (Federal Reserve, https://www.federalreserve.gov/newsevents/speech/warsh20260828a.htm). Underneath some scene-setting about artificial intelligence and a section on his plans to scale back the Fed's use of forward guidance, the economic assessment was pointed.

On employment, Warsh was upbeat: "The jobless rate, at 4.1 percent, remains low by historical standards." On inflation, he was not:

"The Fed's preferred measure of inflation, the 12-month change in the PCE price index, stands at 3.7 percent, while the six-month change is 4.1 percent. The comparable measures from the consumer price index (CPI) are also elevated, as are the core measures of both PCE and CPI inflation. None of these measures are perfect, but they all tell a similar story: Inflation is running above our 2 percent target."

He went further with a piece of underlying-inflation analysis rarely aired this bluntly in a Fed speech: disaggregating the 199 individual components of the PCE price index, he noted that 54% of goods and services showed price increases above 3% over the past 12 months, and that over just the past six months 49% showed annualised increases above 3% — well down from post-pandemic highs of about 77%, but still well above the 32% level of the two decades before the pandemic. He was equally direct about accountability: "There is one signal nobody can miss: The responsibility for 65 months of sustained, elevated inflation sits squarely with the central bank. And that is where it belongs."

He reaffirmed the Fed's target isn't up for reinterpretation — "The Fed's price-stability objective of 2 percent, as measured by the personal consumption expenditures (PCE) price index, is a firm, fixed target" — and set out the bar for cutting: "We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do." He was also candid that recent readings haven't cleared that bar: "while this summer's PCE and CPI readings were better than expected, they do not tell me that underlying trends have meaningfully improved."

Notably, Warsh spent a large part of the speech arguing against the Fed pre-committing to a rate path at all — joking that his outline for the address could be "a trail map . . . just don't call it forward guidance" — which makes it harder to read this as a promise of any specific September move. But markets read the tone regardless, and the tone was hawkish. That's the context for the bond-market and rate-odds moves below.

Oil: the standout mover, again

As at midday 31 August, WTI crude was trading around US$85.30 a barrel (+2.27% on the day) and Brent around US$90.39 (+2.59% on the day) — both up more than 6–8% over the past month and over 30% higher than a year ago (Trading Economics, https://tradingeconomics.com/commodity/crude-oil). The trigger for today's move: the US military struck Iranian rocket launchers reportedly being prepared to deploy mines into the Strait of Hormuz — the first such strike in more than a month, and a reminder that the underlying conflict feeding this year's oil volatility hasn't been resolved, only paused between flashpoints.

The Strait of Hormuz is one of the world's most important oil chokepoints, and any credible threat to mining it tends to move the price of crude immediately, independent of actual supply lost. As the Australian CPI detail above shows, this isn't an abstract market story — automotive fuel was already up 7.5% for the month in Australia's July inflation data — part oil, part excise unwind — before today's spike is even reflected in the figures. If tensions persist through September, it's a reasonable bet that fuel keeps showing up as an inflation driver in both countries' next readings, at the same time the Fed chair is publicly warning inflation still has work to do.

Bond yields: the market is already pricing Warsh's tone in

US Treasury yields moved on both stories this month. The 10-year sits around 4.715% and the 30-year around 5.20% (Trading Economics, https://tradingeconomics.com/united-states/government-bond-yield). Market commentary accompanying that data ties the move directly to Warsh's Jackson Hole remarks: odds of a 25 basis point Fed rate hike in September were being priced at around 57%, up sharply from roughly 40% a week earlier — a striking shift, given markets spent much of the year debating when the Fed would cut, not whether it would hike again. A downward revision to University of Michigan consumer sentiment was cited as a secondary factor.

Worth being precise about what changed: there was no FOMC meeting in August — the Fed's rate range stays where it was set in July until the mid-September decision. What moved is market expectation for that September meeting, on the back of one speech and one inflation read, not a rate decision itself. For anyone holding bonds or bond funds inside super, a higher-yield environment locks in better rates on new fixed-income purchases while typically pressuring the market value of longer-duration holdings already on the books — the same dynamic flagged in this series last month, now compounding on itself.

Interest rates: the RBA held, but its own language has shifted

The Reserve Bank of Australia left the cash rate target unchanged at 4.35% at its 11 August meeting, a unanimous decision (Reserve Bank of Australia, https://www.rba.gov.au/media-releases/2026/mr-26-19.html and https://www.rba.gov.au/statistics/cash-rate/). The reasoning is worth reading closely, because the tone has moved since last month's update. The Board said plainly that "the disruption to global oil supply is adding directly to inflation and there are indications that higher fuel prices are being passed through to prices of other goods and services, so inflation is likely to remain high for some time" — directly consistent with the Transport CPI detail above. At the same time, the Board acknowledged something new: "labour market conditions have eased by a little more than expected in recent months," and for the first time in a while described monetary policy itself as "somewhat restrictive" rather than framing further hikes as the base case.

That's a genuinely different balance from the "we've hiked three times this year and will do so again if needed" framing of the Board's previous statement. Worth being precise here, because it is easy to get wrong: there was no RBA meeting in July. The Board's 2026 calendar ran February, March, May, June, August — it lifted the cash rate at the first three of those (to 3.85%, then 4.10%, then 4.35%) and has held at 4.35% at the two since (Reserve Bank of Australia, https://www.rba.gov.au/statistics/cash-rate/). The statement this month's tone should be compared against is the one from the 16 June meeting, which is also the statement discussed in last month's update in this series. The Board isn't declaring victory — it says inflation "is not expected to return to around the midpoint of the target range until late 2027" and explicitly kept the door open to "increasing the cash rate target further if upside risks materialise" — but it is now weighing that against a softening jobs market, which is a genuinely different calculation to make than a month ago.

RBA rate rise back on the table

The 11 August meeting wasn't the last word this month. July's monthly CPI print — released after the Board had already met — showed headline inflation at 3.5% for the year, a step down from June's 3.8% but hotter than the roughly 3.3% consensus economists had been expecting. Housing did most of the damage to that annual figure, with Food and non-alcoholic beverages and Recreation and culture also adding pressure (see the inflation section above for the full detail). Coming on top of a Board that had already named oil-driven inflation as a live risk, an upside surprise of that size has put a September rate rise back on the table — a sharp change in tone from the "hold and assess" framing of the meeting itself only weeks earlier.

NAB has been the most decisive mover, now forecasting a 25 basis point hike at the RBA's 28–29 September meeting, reversing its earlier hold call — taking the cash rate from 4.35% to 4.60% if it lands. NAB chief economist Sally Auld's reported argument is essentially that the Board had already signalled it would act if price pressures didn't ease, and July's print gave it the trigger. CBA and ANZ have also revised their calls to a hike, but on a different timetable to NAB's — both are now pointing to November, not September. Worth being precise about that distinction: it isn't that three major banks agree a hike lands next month, it's that three now agree a hike is coming, with only one of them calling it as soon as September (reported bank forecasts — third-party commentary, not RBA communications; see Sources).

Markets and Australia's own picture

US equities have had a strong month, and largely shrugged off both the Warsh remarks and today's oil spike. As at Friday 28 August, the Dow Jones Industrial Average closed at 53,560, up 2.05% for August and on track for its fifth consecutive monthly gain; the S&P 500 and Nasdaq Composite have advanced 2.96% and 4.05% respectively this month, led by technology stocks (Trading Economics, https://tradingeconomics.com/united-states/stock-market). Trading Economics' own commentary flags the tension directly: futures slipped on the Monday of the oil strike even as the month's gains held up, with investors now turning attention to Friday's August jobs report for the next real signal on the economy's health.

A large part of that tech-led gain has a name: Nvidia. Its fiscal second-quarter result, reported 26 August, showed revenue of US$96.2 billion, up 106% year-on-year and comfortably ahead of the roughly US$92.2 billion analysts had expected. CEO Jensen Huang went further with the forward guidance, pointing to 70% revenue growth for fiscal 2028 — well above the roughly 44% analysts had modelled — and telling investors "AI has reached its inflection point. It's doing useful work. Its tokens are productive and profitable. Now, compute is revenue. And demand is accelerating." That single result is doing real work inside the index-level numbers above.

It came with a side story worth flagging rather than glossing over. Scrutiny is building over how much of that demand Nvidia is effectively financing itself: the company is part of a group of asset managers and banks mobilising more than US$500 billion for AI data-centre infrastructure, with Nvidia guaranteeing a portion of the residual value of its own chips to help make individual deals bankable — including a guarantee of up to US$105 billion tied to a single customer's data-centre build. Prominent investor Michael Burry, among others, has called the structure a form of circular financing; Nvidia's own executives reject that framing, arguing that outside capital providers underwrite each deal independently on its own merits. It's a genuinely live debate about the quality of the earnings sitting behind this month's rally, not a settled question — worth watching, not on its own a reason to change a long-term view.

The ASX 200 was trading around 9,043 points as at midday 31 August, down 0.55% on the day but up modestly for the month and up 1.22% over the past year (Trading Economics, https://tradingeconomics.com/australia/stock-market). The Australian dollar sat around US$0.7165, essentially flat on the day but up a substantial 9.3% over the past year (Trading Economics, https://tradingeconomics.com/australia/currency) — a reminder that, whatever this month's noise, the AUD has had a genuinely strong twelve months against the greenback.

On the labour market, the ABS reported that Australia's seasonally adjusted unemployment rate rose to 4.5% in July, up from 4.4% in June: "In July, we recorded a 16,000 person fall in employment, whilst the number of unemployed people rose by 4,000," said ABS head of labour statistics Sean Crick (Australian Bureau of Statistics, https://www.abs.gov.au/media-centre/media-releases/unemployment-rate-rises-45-july). The participation rate fell 0.2 percentage points to 66.9%. That's the softening the RBA referenced in its own statement above — not a sharp deterioration, but a clear change of direction from the tighter labour market this series has been reporting through mid-2026.

Australian housing: a buyer swap, a skills gap, and a deepening rental squeeze

Three separate housing-market stories from late August are worth a mention, because together they say something about where cost pressure is actually building in Australia right now.

First-home buyers appear to be stepping into the gap investors are leaving. Market reporting in late August pointed to a pickup in first-home-buyer loan applications after a softer July, with activity concentrated in properties eligible for the government's 5% deposit scheme, even as investor demand in the same lower-priced segment eases back. We haven't been able to independently verify the specific weekly application figures behind that reporting against ABS lending data, which runs on a lag of roughly six to eight weeks — worth treating as directional for now rather than exact, and we'll confirm against the ABS release once it's out.

Apprenticeship completion remains a genuine structural problem, and it feeds straight into building costs. National Centre for Vocational Education Research figures show 52% of apprentices and trainees who started in 2020 didn't complete their training within the expected four years, with recent reporting pointing to low pay, weak on-the-job support and long, expensive commutes as the main drivers of attrition (NCVER, https://www.ncver.edu.au/research-and-statistics/publications/all-publications/apprentice-and-trainee-completion-rates-2025). A shrinking pipeline of qualified tradespeople is one of several inputs into construction costs: the most recent NSW Treasury-commissioned costing, prepared by the Centre for International Economics, put the full delivered cost of a Sydney mid-rise apartment — construction, land, financing, fees, taxes, sales and a required margin combined — at just over $1.05 million a unit in 2025, up from under $917,000 two years earlier, with costs now rising roughly twice as fast as sale prices (NSW Government, https://www.nsw.gov.au/sites/default/files/noindex/2025-09/cie-report-cost-and-feasibility-estimates-for-supplying-residential-dwellings.pdf).

And renting has kept getting harder. Advocacy group Everybody's Home reported in late August that a typical unit nationally now costs around $614 a week — 56% of the take-home pay of someone earning $70,000 — with Sydney, the Gold Coast and Northern WA singled out as the least affordable regions (as reported, ABC News, https://www.abc.net.au/news/2026-08-24/everybodys-home-rental-increases-half-average-income/107070036). None of this is new in direction, but the specific figures underline how much of the current cost-of-living conversation in Australia runs through housing, on the buying and renting sides at once.

Key risks to watch

Three things could turn this month's mixed picture into a more difficult one over the next few weeks. None of these are predictions — they're the specific pressure points where the data could break either way.

1. Oil keeps climbing into September's inflation readings. Today's spike lands on top of a Middle East conflict that was already showing up directly in Australia's July Transport inflation figure — even after allowing for the excise-relief unwind that flattered that month's fuel number. If tensions around the Strait of Hormuz escalate rather than settle, both countries' August and September CPI readings could show fuel adding to inflation just as central banks are trying to judge whether it's safe to ease.

2. Markets have moved rate-hike odds a long way on one speech. A jump from roughly 40% to 57% odds of a September Fed hike is a large swing to price off a single Jackson Hole address, however pointed. Warsh himself spent much of that speech arguing against the Fed pre-committing to any specific path. If the actual September data comes in softer than the market has now positioned for, the unwind could be as sharp as the move itself.

3. Both central banks are now leaning hawkish at the same time, which is itself worth watching. A month ago the RBA looked like the one softening its language while the Fed held firm. July's hot CPI print has pushed at least one major bank (NAB) to call an RBA hike as soon as September, alongside the Fed's own hawkish drift after Warsh's Jackson Hole remarks. If both central banks end up tightening into the same oil shock rather than one holding while the other moves, that's a bigger combined tightening impulse than markets were pricing a month ago — with knock-on effects for the currency and for anything priced off the interest-rate differential between the two countries.

None of these three is unusual for markets to be dealing with at any given time. The point isn't that anything is about to break — it's that a month that started with improving headline inflation numbers is ending with a hawkish Fed chair, a fresh oil shock and a softening Australian jobs market, and none of those three things were fully priced in a month ago.

Bottom line

Headline inflation improved in both the US and Australia through July, but the measures central banks actually watch — core CPI in the US, trimmed mean in Australia — barely moved, and both are still running above target. Kevin Warsh used his first Jackson Hole address as Fed Chair to make that case forcefully, disaggregating the inflation data to argue the improvement is real but shallow, and markets responded by pricing in meaningfully higher odds of a September rate hike rather than the cut some had been expecting. Then oil spiked again on fresh Middle East tension, reinforcing exactly the risk Warsh was pointing to — and reinforcing what Australia's own CPI data already showed a month before this week's news even hit. Through all of it, US equities have had a strong August, up between roughly 2% and 4% depending on the index, while the RBA sits in the more complicated position of a softening jobs market and an inflation risk that isn't going away.

Since the RBA's own meeting, the case for a near-term Australian rate rise has firmed too: a hotter-than-expected July CPI print has already pulled at least one major bank's rate call forward to September. And underneath the headline economic story, Australia's housing market is telling its own tale of buyers and renters both under pressure, while the same US tech rally driving equity indices higher is riding heavily on one company's earnings and an increasingly scrutinised financing structure behind them.

The single-sentence version: don't read this month's improving headline inflation numbers as the whole story — the underlying measures didn't move, the Fed chair went out of his way to say so publicly, oil just proved his point, and Australia's own inflation surprise has now put a September rate rise back in play. None of this is a recommendation about any specific investment, product or provider — it's a snapshot of where the numbers sat as at 31 August 2026, intended as context for conversations with your own adviser or accountant.

Sources

• Federal Reserve — Chairman Kevin Warsh, "In Our Time," Jackson Hole, 28 August 2026
• US Bureau of Labor Statistics — Consumer Price Index Summary, July 2026
• Australian Bureau of Statistics — CPI rose 3.5% in the year to July 2026
• Australian Bureau of Statistics — Unemployment rate rises to 4.5% in July
• Reserve Bank of Australia — Statement by the Monetary Policy Board, 11 August 2026
• Reserve Bank of Australia — Cash Rate Target
• Trading Economics — Crude Oil
• Trading Economics — US Government Bond Yield
• Trading Economics — United States Stock Market
• Trading Economics — Australia Stock Market
• Trading Economics — Australian Dollar
• Savings.com.au — NAB tips September cash rate hike, CBA says November
• The Adviser — NAB predicts September hike in major forecast overhaul
• CNBC — Nvidia earnings takeaways: Huang forecasts 70% fiscal 2028 revenue growth, far above estimates
• Yahoo Finance — Michael Burry flags Nvidia's $500 billion AI financing deal as proof of "byzantine" money loop
• National Centre for Vocational Education Research — Apprentice and trainee completion rates 2025
• ABC News — Low pay, weak mentoring and long, expensive commutes push apprentices to quit
• NSW Government / Centre for International Economics — Cost and feasibility estimates for supplying residential dwellings in NSW
• ABC News — Rents increase to more than half median take-home pay across capitals (Everybody's Home)