Forex analytics. The dollar doesn’t need any drama – ForexNews.PRO
What will the Fed do: keep or lower interest rates? How fast? And to what level will they eventually fall? Here are three issues that worry the financial markets. Investors are looking for clues in the data on employment and inflation, in the news about the pressure of the White House on the central bank. Finally, in the speeches of FOMC officials. One of them made the EURUSD ride a roller coaster again.
Christopher Waller, one of the candidates for the post of Fed chairman, said on the eve of the meeting with Donald Trump that current rates are too high. They have a negative impact on the labor market. It is necessary to loosen monetary policy to a neutral level that does not accelerate or constrain the economy. It is approximately 100 bp below the current levels.
We are talking about four acts of monetary expansion, although the futures market expects two in 2026, and only one appears in the latest FOMC forecasts. It is not surprising that after such “dovish” comments by an authoritative Fed official, the yield on US Treasury bonds fell, and the attack of the “bears” on the EURUSD choked.
Christopher Waller sees no rush to ease monetary policy as long as inflation shows no signs of slowing down. There’s no need to do anything dramatic. The Fed can move at a moderate pace. Consumer price growth rates will fall in 2026.
Stephen Miran agrees with this, calling for aggressive monetary expansion. He calls some of the inflation phantom. For example, the cost of portfolio management services increases along with stock indexes, as they are linked to the value of assets. If they are excluded, the PCE will fall to 2.6%.
Of course, there is logic in such speeches. But it is necessary to take into account the components that, on the contrary, slow down rather than accelerate inflation. However, when there is a directive from the White House to lower rates, you can turn a blind eye to some things.
In my opinion, if Christopher Waller managed to convince such authorities as Jerome Powell and John Williams that the labor market is more important than inflation, the number of “pigeons” will grow. This means that there are chances for aggressive rate cuts. In this regard, the release of data on November consumer prices can help the EURUSD.
Figures close to 3% will lead the market to focus on the “dovish” part of the FOMC forecast for the federal funds rate. This will result in falling yields on Treasury bonds and the US dollar. Not to mention the slowdown in CPI.
