Markets are pricing in a rate hike by the Fed in their last meeting of the year in December. This is in line with the dot-plot published in September and also Yellen’s insistence to hike despite the frustratingly low inflation.
Ahead of the highly anticipated inflation report later today, we heard from two Fed officials. Their messages have been mixed.
Eric Rosengren of the Boston Fed said it is appropriate to raise rates in December and to hike three times in 2018, fully in line with the dot-plot. He added that there is a high probability of a hike in December. He tied interest rates to the stock market.
On the other hand, Raphael Bostic of the Atlanta Fed said that he is not sure that Fed should raise rates in December. He cast doubts but did say that inflation is starting to pick up around the world.
Core CPI stood at 1.7% y/y for quite a few months. Early in 2017, this key measure was higher, above 2%. The Fed focuses on Core PCE, which follows the Core CPI. The PCE number almost reached 2% but fell to 1.3% in the last measure.
We will know soon enough, at 12:30 GMT. Preview: Will the CPI report send the dollar down?Get the 5 most predictable currency pairs