DBS Bank: Core CPI Expected to Slow to 0.2%

DBS Bank analyst Philip Wee stated that Federal Reserve's Williams supports another rate hike before the end of 2026, but does not endorse the market's expectations for further tightening in 2027. Williams pointed out that the Fed relies on the potential inflation trajectory over the next one to two years to guide monetary policy, rather than on individual data points. Against this backdrop, today's CPI report is expected to show core inflation slowing from 0.3% to 0.2%. He believes that the forces driving inflation down still exist, with price pressures mainly concentrated in the AI and energy sectors, rather than spreading to the broader economy. Williams sees little evidence of labor market-driven inflation or overheating in the U.S. economy, which is crucial for the dollar's performance. Since the Fed's rate hike in September, the dollar's upward trend has largely depended on expectations of further tightening.

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