Higher US inflation will not stop the Fed from cutting rates

Expert market comment made by senior analyst Alex Kuptsikevich of the FxPro Analyst Team: Higher US inflation will not stop the Fed from cutting rates
FxPro | 308 days ago

US consumer inflation was in line with analysts' average forecasts, but it still triggered a weakening of the dollar and increased interest in buying stocks. This reaction suggests that traders were expecting a higher number and that there is now a slight shift towards a more dovish Fed for the coming months.

Headline CPI rose 0.2% for the fourth month in a row, and the annual rate climbed from 2.4% to 2.6%. While this is above the 2% target, it shouldn't prevent the central bank from cutting rates in December and continuing to do so.

The core price index, which excludes food and energy, rose 0.3% for the third month in a row, and the annual growth rate was 3.3%.

Coincidentally, the start of the Fed's taper in September coincided with a stabilisation of the rate of price increases at elevated levels. Nevertheless, current levels do not worry markets and observers. The odds of a rate cut in December have risen to 79% from 59% the day before, as the Fed Funds rate in the 4.50%-4.75% range creates rather tight monetary conditions, impressively above the inflation rate.

Technically, this is bearish news for the dollar and positive for the equity and commodity markets, as it reignites speculation about the next rate cut. However, traders should bear in mind that attitudes towards the dollar have been influenced by news of potential trade tariffs since the beginning of October and probably over the next few weeks, with the focus returning to monetary policy by December.

By the FxPro Analyst Team

FxPro
Type: NDD
Regulation: FCA (UK), SCB (The Bahamas)
read more
Currencies Steady Ahead of Fed; UK CPI Holds, Oil Pressured | 17th September 2025

Currencies Steady Ahead of Fed; UK CPI Holds, Oil Pressured | 17th September 2025

Markets traded cautiously Wednesday as traders awaited the Fed’s rate decision. EUR/USD slipped near 1.1850, NZD/USD retreated below 0.6000, and AUD/USD stayed subdued. WTI crude came under renewed pressure, while UK CPI eased slightly to 3.8%, keeping BoE policy in focus. Volatility is expected to rise as Fed, ECB, and BoE updates drive direction across FX and commodities.
Moneta Markets | 15h 18min ago
Fed cut expected, market reaction hinges on multiple factors

Fed cut expected, market reaction hinges on multiple factors

Fed meeting today; rate decision at 18:00 GMT, Powell speaks 30 minutes later; A 25bps cut is expected but details matter for markets, particularly the dot plot; Powell expected to follow the Jackson Hole script; all eyes on possible signals about October; Dollar could suffer from a dovish show; equities fear downbeat economic comments;
XM Group | 17h 20min ago
EUR/USD Hits Four-Year High: All Eyes on the Fed

EUR/USD Hits Four-Year High: All Eyes on the Fed

The EUR/USD pair surged to 1.1854 USD on Wednesday, reaching its highest level since September 2021. Investors are positioning ahead of the Federal Reserve’s highly anticipated interest rate decision, due later today.
RoboForex | 18h 32min ago
ATFX Market Outlook 17th September 2025

ATFX Market Outlook 17th September 2025

U.S. retail sales for August posted robust growth, but tariffs and labor market weakness continue to pose downside risks. All three major U.S. stock indices closed lower in choppy trading as investors remained cautious ahead of the Federal Reserve’s widely anticipated rate cut. The Dow Jones fell 0.27%, the S&P 500 slipped 0.13%, and the Nasdaq eased 0.07%.
ATFX | 22h 53min ago