Federal Reserve: Dovish repricing on data and inflation focus – BNY
John Velis at BNY Markets reiterates that he expects no Federal Reserve rate hikes this year, even as risks remain skewed to the upside.
Federal Reserve Chair John Velis anticipates no rate hikes this year, despite a weak US jobs report that decreased the odds of a September hike and reduced tightening expectations along the yield curve. The upcoming CPI and PPI releases are central to the Fed's rate deliberations, with a shift towards a more dovish stance due to these economic indicators.
The probability of a September hike has fallen from over 70% to around 50-50, and longer-term rates have also adjusted, with expectations now closer to 1.8 hikes by next July. Inflation remains the primary factor for the Fed in its rate decisions, with fresh data on inflation expected this week. A potential disinflationary trend could lead to a more dovish curve re-pricing.
Meanwhile, other currencies and commodities are impacted by geopolitical tensions, Fed Chair Kevin Warsh's remarks, and recent market movements.
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