CPI points to persistent US inflation pressures, Fed’s Bowman warns

“CPI data suggests inflation pressures may persist,” said Federal Reserve (Fed) Governor Michelle Bowman. She added that “bringing inflation down remains a priority.”

Speaking at the Council on Foreign Relations, Bowman described stronger economic growth and an improved labour market that is not contributing to inflation. Longer-term inflation expectations remain “very well anchored,” she said.

Main points:

Further work appears necessary as inflation persists and labour conditions strengthen

With financial conditions now tighter, the Fed must assess the costs of further policy tightening.

Reducing inflation continues to be a priority.

3.3% rise in core PCE likely in October, driven by energy prices and AI-related demand

2% is expected to come closer for core PCE next year as shocks unwind

Growth in the economy has accelerated this year

Persistent inflation pressures remain possible, CPI data indicates

Financial stability risks are a focus if AI returns disappoint

An improved labour market is neither tight nor contributing to inflation

External financing plays a growing role in AI development

Inflation expectations over the longer term remain firmly anchored.

While inflation expectations are an important data point, they do not necessarily determine my thinking.

Before I could be confident that inflation will decline next year, I would need evidence that AI and Middle East risks are easing

Data on AI debt counterparties is being sought by the Fed

Maintaining open communication channels with the Treasury is critically important

I do not believe AI will deprive the US economy of jobs

Alongside higher worker productivity and new jobs, AI will remove jobs that are less necessary

Through its continuing cybersecurity examinations of banks, the Fed has observed substantial attention to detecting and patching vulnerabilities

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

0.87% Gain Against AUD: US Dollar Today

The US Dollar (USD) gained 0.87% against the Australian Dollar, its strongest performance today. The table below sets out its percentage moves against the listed major currencies.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.51%	0.73%	0.52%	0.48%	0.87%	0.51%	0.72%
EUR	-0.51%		0.21%	0.02%	-0.03%	0.35%	0.01%	0.21%
GBP	-0.73%	-0.21%		-0.23%	-0.25%	0.14%	-0.21%	0.00%
JPY	-0.52%	-0.02%	0.23%		-0.03%	0.35%	0.00%	0.20%
CAD	-0.48%	0.03%	0.25%	0.03%		0.39%	0.03%	0.24%
AUD	-0.87%	-0.35%	-0.14%	-0.35%	-0.39%		-0.35%	-0.14%
NZD	-0.51%	-0.01%	0.21%	-0.00%	-0.03%	0.35%		0.20%
CHF	-0.72%	-0.21%	-0.00%	-0.20%	-0.24%	0.14%	-0.20%

Percentage movements between major currencies are presented in the heat map. Select the base currency in the left-hand column and the quote currency in the top row. Selecting the US Dollar on the left and following that row across to the Japanese Yen, for instance, gives the percentage change for USD (base)/JPY (quote).

Fed: Key Questions Answered

Federal Reserve Policy and Its Effect on the US Dollar

The Federal Reserve (Fed) sets US monetary policy with two objectives: stable prices and full employment. Interest rate adjustments are its main means of pursuing these mandates. If prices climb too rapidly and inflation exceeds its 2% target, the Fed increases interest rates. Higher borrowing costs across the economy make the US more attractive to international investors, strengthening the US Dollar (USD). Conversely, inflation below 2% or an excessively high unemployment rate may prompt the Fed to cut rates to stimulate borrowing. This puts pressure on the Greenback.

Eight Meetings a Year: The Fed’s Policy Schedule

At eight policy meetings each year, the Federal Open Market Committee (FOMC) reviews economic conditions and determines monetary policy for the Federal Reserve (Fed). Twelve Fed officials attend the FOMC: all seven Board of Governors members, the Federal Reserve Bank of New York president, and four of the other eleven regional Reserve Bank presidents. The latter serve rotating one-year terms.

Quantitative Easing (QE): How It Affects USD

When conditions become extreme, the Federal Reserve may turn to Quantitative Easing (QE) to expand credit flows substantially within a stalled financial system. This unconventional policy is used in crises or periods of exceptionally low inflation. During the Great Financial Crisis in 2008, it was the Fed’s preferred tool. Under QE, the Fed prints additional Dollars to purchase high-grade bonds from financial institutions. The US Dollar typically weakens as a result.

Quantitative Tightening (QT): Implications for the US Dollar

Reversing QE, quantitative tightening (QT) involves the Federal Reserve ending bond purchases from financial institutions. It also stops reinvesting the principal from maturing bond holdings in new bonds. The process generally supports the US Dollar’s value.