Morning Money — Tuesday, September 15

The pressure on Canadian wallets is coming from two directions this morning. August inflation held at 3%, while oil continues to climb as attacks on Saudi energy infrastructure raise fresh supply concerns. Brent is around US$107 a barrel. For Canada, expensive oil can help energy producers and the TSX, but it also risks keeping gasoline prices and inflation elevated — making it harder for interest rates to move lower.

Markets are feeling that tension. U.S. 10-year Treasury yields pushed above 5% overnight, their highest level since 2007, as investors increasingly price in another Federal Reserve rate hike. Asian markets were mostly weaker, U.S. futures were subdued, and gold slipped toward US$4,280 as higher yields strengthened the dollar. Canadian energy shares will be one area to watch at the open.

What to watch: the Federal Reserve begins its two-day meeting today. With oil rising and inflation proving sticky, tomorrow’s rate decision and the Fed’s message on what comes next could set the tone for markets well beyond the U.S.