US Dollar: Fed rhetoric and CPI expectations guide yields – Rabobank

Rabobank’s RaboResearch team notes recent comments from Federal Reserve (Fed) officials Barkin and Goolsbee align with a more hawkish FOMC tone, emphasizing persistent core CPI, especially in services, and justifying further rate hikes. The September dot plot signals one more hike and then a prolonged hold through 2027, as markets await October US CPI data and its implications for US yields.

Fed signals and CPI in focus

"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.)