USD sell off on back of US inflation drop but far too early for Fed to 'pop champagne corks'
|The Dollar sold-off following today’s long-awaited CPI report, albeit nothing dramatic, and we ultimately don’t expect the data to have a material impact on the path for Federal Reserve rates.
The main inflation gauge continues to grind higher, rising to its joint highest level since May 2024, which we’re pinning on the ripple effects from Trump’s trade policies on consumer prices.
Core inflation has eased slightly, which provides a nice breather, but with the tariffs set to keep prices elevated, it is far too early for Fed officials to pop the champagne corks.
For now, the Fed appears laser-focused on supporting the jobs market, and that all but seals the deal for two further cuts in October and December. More cuts are on the cards in 2026, but the pace of easing could hinge on whether officials continue to chalk up the tariff-induced increase in inflation as a blip, or something stickier.
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