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Federal Reserve (Fed) policymakers are gearing up for their scheduled appearances on Tuesday, coinciding with the return of full markets and anticipation surrounding the release of high-impact US Personal Consumption Expenditures (PCE) inflation data later in the week.
Throughout the week, the US Dollar has faced moderate selling pressure, extending Friday’s downturn, propelled by an unexpected easing in UoM 5-year Consumer Inflation Expectations for May. The latest reading, at 3.0%, decreased from April’s 3.1%, falling below the market consensus of 3.1%.
Market sentiment suggests a 50% probability that the Fed will maintain interest rates in September, as indicated by the CME Group’s FedWatch Tool. Over the past week, Fed policymakers have leaned toward a cautious stance on the inflation outlook, sparking concerns among market participants regarding potential Fed rate cuts this year.
In the early American session, Federal Reserve Bank of Minneapolis President Neel Kashkari is slated to speak and participate in a panel at the Barclays-CEPR International Monetary Policy Forum. Following this, Fed Governor Lisa Cook and San Francisco Fed President Mary Daly will share their insights at a panel discussion titled “AI and the Economy,” hosted by the Federal Reserve Bank of San Francisco.
Recent remarks from Fed officials have varied. Fed Governor Michelle Bowman expressed support for either delaying the pace of quantitative tightening (QT) or implementing a more gradual reduction in balance sheet run-off. She emphasized the importance of continuing to shrink the balance sheet to achieve ample reserves promptly, particularly while the economy remains robust.
Cleveland Fed President Loretta Mester refrained from discussing monetary policy, instead focusing on Fed communications. She suggested that FOMC statements should provide more detailed assessments of the current economy, its influence on the outlook, and associated risks.
Minneapolis Fed President Neel Kashkari, in a CNBC News interview during European hours, addressed inflation and interest rate outlooks. Kashkari advocated for the Fed to await significant progress on inflation before considering lowering the policy rate, hinting at the potential for rate hikes if inflation fails to subside further.
