Greg Gibbs, Analyst at Amplifying Global FX Capital, notes that the Fed is displaying considerable confidence in its outlook for several more rate hikes into the middle of next year.
Key Quotes
“In light of the elevated uncertainty around global growth, Brexit, Italy, the Chinese financial system and US trade policy, the relative certainty that the Fed will hike rates in December and next year may be driving bullish USD sentiment.”
“There may be an opportunity for Fed Chair Powell to express some concern over the increased risk to US growth arising from weaker global growth on Wednesday when he takes part in discussion with Dallas Fed President Kaplan. But we doubt at this stage Powell is ready to change his tune.”
“The evidence from the US economy points to ongoing stable and solid growth with increasing inflation pressure. Wages growth has picked up, and surveys suggest businesses are facing higher costs, including from tariffs, and are more inclined to pass these through to selling prices.”
“Inflation expectations remain stable, and few anticipate a rapid pick-up in US inflation. But evidence from the domestic economy suggests that the Fed should gradually lift rates towards and perhaps a little beyond levels that might be regarded as neutral.”
“US CPI inflation data on Wednesday will be watched closely for evidence for or against the notion that inflation pressure is building in the USA, and may be important for direction in the USD.”
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