The U.S. economy added 162,000 jobs last month, exceeding economists' expectations and strengthening Wall Street expectations that the Federal Reserve may need to raise interest rates to contain inflation. Joe Brusuelas, RSM chief economist, said the central bank is behind the curve and would need to hike rates to reinforce its credibility, potentially creating political problems at 1600 Pennsylvania Avenue. The Trump administration has pressed for lower borrowing costs and a flatter yield curve, with the president threatening a trade embargo if rates are not reduced. Fed Chairman Kevin Warsh has not provided forward guidance, although his speech in Jackson Hole last month was viewed as hawkish. Fed Governor Christopher Waller supported holding rates steady if next week's inflation report shows easing prices. Macquarie shifted its expected first hike from December to September, followed by another in the first quarter of 2027, while Polymarket priced a 53% chance of a hike against 48% for a hold at the Sept. 15-16 meeting. Investors are also questioning whether a hike would reduce long-term Treasury yields, which have been pushed higher by inflation linked to oil prices, record-high debt, larger auctions and increased demand for a term premium. Treasury buybacks eased yields for about a day, while an intervention supporting Japan's currency did little to slow the long end of the U.S. yield curve. The bond-market pressure is unfolding alongside a strong AI investment cycle, with Nvidia nearing record highs and Anthropic reportedly preparing to go public. UBS favors continued exposure to AI, power and resources, while some bond strategists recommend a barbell portfolio combining longer-dated Treasurys with short-term TIPS (inflation-protected Treasury bonds).