DBS Bank: Core CPI May Slow Further, Dollar Rally Faces a Test

Odaily reports: DBS Bank analyst Philip Wee said that Fed's Williams supports another rate hike by the end of 2026, but is unwilling to endorse the market's pricing of further tightening in 2027. Williams also reminded the market that the Fed remains data-dependent, rather than "dependent on any single data point." Monetary policy will be guided by the potential inflation trajectory over the next 1 to 2 years, rather than individual data releases.

Against this backdrop, today's CPI report should focus more on core inflation, which is expected to slow from 0.3% to 0.2%. Williams believes that the forces driving inflation lower remain intact, with price pressures mainly concentrated in AI and energy rather than spreading to the broader economy. He has seen little evidence of labor-market-driven inflation or an overheating U.S. economy. This distinction is crucial for the dollar, because since the Fed hiked rates in September, the dollar's rally has largely depended on expectations of further policy tightening. (Jinshi)