Inflation report to offer clarity, not direction, for the Fed – Commerzbank

It seems that the US administration has at least recognized that inflation data for the third quarter is necessary to calculate social security benefits for the coming year. This is why some civil servants, who have been sitting at home idle for more than three weeks due to the shutdown, have been called back to the Bureau of Labor Statistics to at least provide this figure on Friday. The September inflation data should actually have been published on October 15, Commerzbank's FX analyst Antje Praefcke notes.

USD may see short-term lift as inflation data resumes

"This has a nice side effect for the Federal Reserve Bank, as it will then at least have current inflation data available for its decision-making next week. The price data is important for the Fed because it could provide an indication of the extent to which tariffs have pushed up consumer prices. And in fact, this is likely to happen gradually and to a moderate extent. However, the data is unlikely to be a game changer for next week's Fed meeting, as the majority of Fed members assume that any tariff effect on inflation will be temporary anyway. The dollar is already trending somewhat stronger ahead of the figures, but even an upward surprise in the price data is unlikely to deter the Fed from cutting rates next week."

"Solid data on labor market developments would actually be more important for the Fed anyway, as it has been focusing more on its second goal, full employment, for several months now. In this respect, despite Friday's inflation data, the US Federal Reserve will still be flying half blind when it meets next week to decide on the key interest rate. However, as the labor market situation has deteriorated in recent months, the Fed is likely to cut the key rate further regardless of what Friday's inflation figures show."

"In short, the dollar is likely to pick up a little more momentum when at least one set of data that is decisive for monetary policy is published again. Corresponding short-term reactions to the publication may therefore shake up the dollar exchange rate somewhat. However, massive reassessments of interest rate expectations and thus also a reassessment of the USD's value are unlikely. This would probably require a major surprise from the Fed, such as a pause, which our experts consider unlikely."