Global Markets-Bond yields near multi-year peaks after accelerating U.S. inflation, traders add to Fed hike bets

A selloff in global equity markets paused on Friday as oil prices retreated from a four-month high, but accelerating U.S. consumer inflation prompted traders to add to expectations for a rate hike from the Federal Reserve next week, keeping bond yields elevated.

The Consumer Price Index increased 0.4% last month after edging up 0.1% in July, the Labor Department's Bureau of Labor Statistics said.

"Today’s inflation data have done nothing to change our view that the Fed is behind the curve," said David Rees, head of global economics at Schroders.

"While headline inflation is being pushed around by rising energy prices, the bigger picture is that the economy is running hot and domestically generated inflation is grinding higher."

Traders were quick to add to bets for a rate hike from the Fed at its two-day meeting next week. Markets now see about an 85% chance of a quarter-point hike, compared with around 67% prior to the data.