US Dollar: Yields take their cue from Fed rhetoric and CPI expectations – Rabobank

Persistent core CPI inflation, particularly in services, provides justification for further rate rises, according to recent remarks by Federal Reserve (Fed) officials Barkin and Goolsbee highlighted by Rabobank’s RaboResearch team. Their comments reflect the FOMC’s increasingly hawkish tone. With October US CPI data and its implications for US yields in focus, the September dot plot points to one further increase before rates remain on hold through 2027.

Fed strikes hawkish tone as markets await CPI

"A few Fed speakers crawled out of the woodwork yesterday to opine on the inflationary environment in the US, including alternate voter Barkin, from the Richmond Fed, and non-voter Goolsbee from Chicago. Rhetoric from both broadly aligned with the now more hawkish lilt across the FOMC, citing the persistence of core CPI inflation, especially in services, and the justification for future hikes."

"That said, the dot plot from the September SEP (which is noticeably missing a dot from Fed chair Warsh) projects one more Fed hike, followed by a hold throughout 2027, even as many FOMC board members project a second hike in 2027."

"Bloomberg-surveyed analysts are forecasting some cooling from 0.6% m/m to 0.3% m/m, as national US average gasoline prices fell throughout October from September highs."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)