Dollar gains as inflation signals rate hike
The US Dollar Index rose slightly today by 0.1% to 99.13, supported by inflation data that showed overall and core inflation increasing in August by 0.4% and 0.3% respectively. This reinforced expectations of a 25 basis point interest rate hike by the Federal Reserve next week. The data indicates that inflation remains high, as the Personal Consumption Expenditures (PCE) index has stayed above the Fed's 2% target for 65 months, increasing the likelihood of tightening monetary policy. Additionally, the data raised the probability of a rate hike to around 87%, impacting the US bond market, where yields on 20- and 30-year bonds increased, along with fluctuations in the 2-year bond yields, amid ongoing expectations for rate increases to control inflation.
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