Dollar Steadies as Hot CPI Report Mulled

The dollar index steadied around 102.2 on Friday after sharp swings in the previous session, as investors continued to assess stronger-than-expected US consumer inflation data and its implications on the monetary policy outlook. The annual inflation rate stood at 3.4% in December, faster than the 3.2% forecast, while the monthly CPI showed a 0.3% increase, exceeding forecasts of 0.2%. Cleveland Fed President Loretta Mester said the latest CPI figures means that it would likely be too soon to cut rates, while Richmond Fed President Thomas Barkin said the data did little to clarify the path of inflation. Still, markets are pricing in around a 70% chance that the Federal Reserve will start cutting interest rates in March, although that compared with nearly a 90% chance seen previously. Investors now look ahead to US producer inflation data on Friday to guide the outlook further.

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