The latest FOMC minutes struck a hawkish tone, although they were published before the softer September payrolls report and the more modest inflation outcomes seen since. The central expectation remains that the Fed will keep rates unchanged this month, with the September inflation report projected to show a monthly core reading of 0.2% or less. That forecast underpins the view that policy can stay on hold for now.
Market Repricing and Bond Market Dynamics
If core inflation prints above expectations, markets could quickly reprice the probability of an October rate rise, potentially pushing the dollar out of the trading range in place since the summer of 2025. The base case also assumes stabilising bond markets and limited spillover from energy price spikes, conditions that would reduce recent support for the dollar’s rally.
Political Factors and the Dollar Outlook
Attention is also turning to the early November midterm elections, where the prospect of Congressional gridlock is framed as a factor that could weigh on the greenback by constraining new spending or tax measures.
Start trading now — click here to create your real VT Markets account.
