DBS Bank analyst Philip Wee stated that Federal Reserve Chair Williams supports another rate hike before end-2026 but remains unwilling to validate market pricing for further tightening in 2027. Williams emphasized that monetary policy will be guided by the potential inflation trajectory over the next one to two years rather than individual data points, noting that disinflationary forces remain intact with price pressures concentrated in AI and energy sectors rather than spreading broadly across the economy.
Against this backdrop, today's CPI report is expected to show core inflation slowing from 0.3% to 0.2%. Williams observed little evidence of labor market-driven inflation or economic overheating, a distinction critical for the dollar as its rally since the September rate hike has relied heavily on expectations of further policy tightening.
DBS: Core CPI Expected to Slow as Dollar Rally Faces Test
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