Analyst Mike Cahill said next week’s CPI print could determine whether the Fed
moves. A stronger, broad-based CPI could force action because it would depart
from the policy framework Williams and Waller outlined this summer; a weaker
print should allow the Fed to hold rates without triggering adverse market
reaction. A mid-range outcome is trickier, since markets are not easy about
inflation near 2.5% while the Fed remains on hold. Cahill said recent dollar
weakness reflects the Fed’s tilt to keep rates unchanged and the Treasury’s
preference to let FX markets absorb adjustment rather than shift pressure onto
the U.S. fixed-income market.
