JABAR EKSPRES – The United States (US) dollar strengthened against a basket of major peers in late trading Thursday (6/29) morning WIB, after Federal Reserve Chairman Jerome Powell refused to rule out the possibility of consecutive interest rate hikes as the central bank continues to fight inflation.
The dollar index, which measures the greenback against six major rivals, rose 0.41 percent to 102.9122 in late trade.
At a central bank panel hosted by the European Central Bank (ECB) on Wednesday, Powell said that current policy settings may not be restrictive enough.
“We believe there will be more restrictions to come. What’s really driving it… is a very strong labor market,” Powell said.
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In addition, Powell also said he does not see inflation falling to the Fed’s 2.0 percent target until 2025.
According to the CME FedWatch tool, the market sees a more than 80 percent chance of a rate hike next month, which is also seen as the last rate hike.
Georgette Boele, senior economist sustainability researcher at ABN AMRO, noted that her bank’s rate forecast is roughly in line with market expectations, which could support US nominal and real yields as well as the US dollar.
“Previously, we did not have an aggressive rate cut view in the near term, but we expect the easing cycle to start by the end of this year,” Boele said.
“We no longer have rate cuts for the Fed this year and fewer total rate cuts in 2023-2024. This is positive for the US dollar,” he also said.
ECB President Christine Lagarde said she felt “we still have grounds to cover” and thought “we will most likely hike again in July.”
Bank of Japan Governor Kazuo Ueda said his institution may tighten ultra-loose policy if inflation does not ease, while Bank of England Governor Andrew Bailey emphasized the importance of lower prices and said he would not consider raising the 2.0 percent inflation target.
