US Dollar: How are Fed rhetoric and CPI expectations shaping yields? – Rabobank

US yields are in focus as markets await October US CPI data and assess its potential implications. Rabobank’s RaboResearch team says the latest remarks from Federal Reserve (Fed) officials Barkin and Goolsbee reflect the FOMC’s increasingly hawkish tone. Both pointed to stubborn core CPI inflation, particularly in services, as grounds for further rate hikes. Meanwhile, September’s dot plot indicates one additional hike before rates remain on hold through 2027.

What do Fed signals and CPI mean for US yields?

"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.)