Analyst: CPI strength or weakness may determine whether action is taken next week, leaving the Fed in a dilemma

Odaily News: Analyst Mike Cahill pointed out that if CPI data comes in stronger and the result is broad-based enough, the Fed may take action, as this would deviate from the policy framework proposed by Williams and Waller this summer. If the data is softer, it should be enough for the Fed to keep rates unchanged without triggering an adverse market reaction. But if the data lands somewhere in the middle, the situation becomes more tricky, because the market is already visibly uneasy about inflation running at around 2.5% while the Fed remains on hold.

Overall, Cahill believes that the weakening dollar reflects several factors, including the Fed's inclination to keep rates unchanged, and the Treasury's already demonstrated policy preference for letting the foreign exchange market adjust rather than putting adjustment pressure on the fixed income market. (Jinshi)