August jobs report beats expectations, shifting Fed focus to inflation and CPI data.

The August jobs report showed stronger-than-expected job growth with 162,000 jobs added and unemployment steady at 4.1%, easing concerns about labor market weakness. This shifts the Federal Open Market Committee's (FOMC) attention fully to inflation and the upcoming Consumer Price Index (CPI) report. A high CPI reading could force a rate hike or cause division within the FOMC, amid political pressures including from former President Trump. Bond yields, especially 10-year Treasuries, are expected to rise, potentially surpassing 5%, which could tighten equity risk premiums and challenge risk assets. Regardless of the FOMC's decision, hawkish signals or dissent among members are likely to push yields higher as bond market vigilantes regain influence.