Dollar Extends Gains on Hotter CPI, Hawkish Fed Comments
The dollar index extended its gains to 102.3 on Tuesday, amid growing expectations that the Fed could pursue a more aggressive pace of interest rate hikes in the coming months, following a hotter-than-expected inflation report and increasingly hawkish comments from Fed officials. Consumer prices rose 0.4% in October, exceeding market expectations of a 0.3% increase, while core CPI advanced 0.3% for the third consecutive month, also above forecasts of 0.2%. Adding to the hawkish outlook, Fed Governor Waller warned that a 50bps rate hike in December may be necessary. Meanwhile, Dallas Fed President Logan supported at least two additional 25bps increases, suggesting that further tightening may be required at a faster pace than policymakers have pursued this autumn. Markets currently assign an approximately 88% probability to a 25bps rate hike at the Fed's next meeting, while further increases in January and potentially April are also being priced in.
The dollar index extended its gains to 102.3 on Tuesday, amid growing expectations that the Fed could pursue a more aggressive pace of interest rate hikes in the coming months, following a hotter-than-expected inflation report and increasingly hawkish comments from Fed officials. Consumer prices rose 0.4% in October, exceeding market expectations of a 0.3% increase, while core CPI advanced 0.3% for the third consecutive month, also above forecasts of 0.2%. Adding to the hawkish outlook, Fed Governor Waller warned that a 50bps rate hike in December may be necessary.
Meanwhile, Dallas Fed President Logan supported at least two additional 25bps increases, suggesting that further tightening may be required at a faster pace than policymakers have pursued this autumn. Markets currently assign an approximately 88% probability to a 25bps rate hike at the Fed's next meeting, while further increases in January and potentially April are also being priced in.