The Federal Reserve’s preferred inflation index rose, reinforcing the case for a more cautious approach to future interest rate cuts.
Policymakers are increasingly inclined to maintain a balanced approach, focusing on supporting economic growth while containing inflation risks.
Meanwhile, investors are closely analyzing the economic impact of policies expected to be introduced by the new administration of President Donald Trump.
Fiscal measures and announced Cabinet appointments are expected to increase inflationary pressures, which will continue to influence the direction of Fed policy.
The latest US inflation data, which was in line with market expectations, has provided clarity on the interest rate outlook. Traders now see a higher probability of a 25 basis point cut in December, compared to the previous deadlock over the Fed’s next move.
As the Fed continues to maintain this balance, focus remains on upcoming economic data and policy officials’ statements to assess the timing and scale of the central bank’s next steps.
The market will continue to monitor the interaction between fiscal policy developments and inflation trends as a key driver of monetary policy going forward.
