- The Fed maintained its policy rate at the 4.25-4.50% range, pushing back against political pressures to cut rates as higher tariffs are spilling over to the headline inflation number.
- The Fed may need to engineer a stronger USD to counteract the tariff-induced inflation pressures, but the gradual weakening in US growth momentum may weaken the Fed’s hawkish credibility.
- The Fed’s limited policy options may lead to the USD moving sideways, potentially allowing BI and other central banks to further adjust their policy rates.
