- Fed's Waller dismisses US CPI report as 'just one data point', markets 'way out in front'
- Fed's Brainard: Appropriate 'soon' to move to a slower pace of increases
And the lack of consistency isn't a good look on the dollar as we approach a new phase in the central bank tightening cycle. What is arguably clear is that the Fed may look to tone down its aggressive approach by slowing down the pace of rate hikes. However, such a pivot is still too early to be seriously discussed considering how inflation remains rather elevated at this point.
In other words, it is consistent with the most recent FOMC meeting in which the statement included this little bit:
"In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments."
It took Powell's press conference to really push back against any sort of thinking that such a move will be coming soon but with every softer consumer inflation reading, you would think that markets will feel vindicated to believe that the turn will come sooner rather than later.
For now, Fed policymakers must strike a balance between reaffirming their resolve but opening up the door to a more flexible option whereby they may move at a more 'deliberate' pace. The issue here is that broader markets have been hounding the Fed on a potential policy pivot for many months now (think back to Jackson Hole) and are desperate for just about anything or any slip up in terms of communication by the central bank.
As such, if their communique continues to offer a bit of a mixed take on things, that essentially takes away arguably the strongest tailwind for the dollar during the course of the year. We may not see a material reversal in the greenback just yet but as this plays out, it means that dollar gains won't come by as easily anymore moving forward.