The US dollar had been rallying ahead of Janet Yellen’s speech on financial stability at Jackson Hole, 100 pips in USDJPY and EURUSD. Her speech brought nothing new or dramatic and the dollar sold off immediately.
Federal Reserve Bank of Dallas President Robert Kaplan speaking on Inflation and labor gave color to Fed economists study Getting a Jump on Inflation was released. How technology and the U.S. debt level is impeding inflation.
The FOMC minutes from the last meeting in July underscore just how confused the majority of the Fed is about what inflation is not higher. The US dollar reacted negatively. Most Fed officials also support a balance sheet move at the next FOMC meeting.
This week’s PPI and CPI both missed expectations coming in lower. This was in line with Federal Reserve Governor Dudley’s view yesterday and Kaplan’s today. The Philly Fed Economists also see 2% as illusory.
Cleveland Fed President Loretta Mester commented on rates and inflation. These are interesting in light of the recent weak inflation numbers and the tumbling U.S. dollar, says 3 hikes a year appropriate.
On Tuesday the Federal Reserve’s FOMC begins a two day meeting. On Wednesday at 2:00 p.m. ET there will a FOMC statement issued. The Fed is not expected to change interest rates but investors will be looking for more detail on its balance sheet and for further and inflation.
IMF Is out with its U.S. Article IV Press Briefing, its view on the U.S. economy and its prescriptions for improvement. Lower forecasts put the IMF in-line with the Fed.
The Federal Reserve has raised interest rates by a quarter of a percent to 1.25% as had been expected by over 90 percent of the market (Fed Futures). The FOMC hikes maintained it’s forecast for one more hike in 2017 and says it is ‘monitoring inflation developments closely’.