The dollar was slipping on Tuesday, in a fragile rise against the main currencies, before the publication of the minutes of the last monetary meeting of the Federal Reserve (Fed), economists still counting on a rate cut in September. Around 6:40 p.m. GMT, the greenback gained 0.03% against the euro to 1.0854 dollars per euro while it lost as much against the pound sterling to 1.2710 dollars per pound.
Awaiting the Fed’s minutes on Wednesday which should give details on the state of mind of the members of the institution in the face of inflation when they decided on May 1 to leave high rates unchanged, brokers have dissected the multiple interventions of its members since the start of the week. Christopher Waller, a Fed governor, said further rate hikes are “probably useless”stressing that their current level seems restrictive enough to slow down inflation, the April figures having shown progress, too “weak” however, according to him.
“The next step will be a rate reduction”
“Central bankers should never say never, but the data suggests that inflation is not accelerating, and I think further increases in the policy rate are probably unnecessary”, declared Christopher Waller during a speech in Washington, at the Peterson Institute of International Economics (PIIE). A vice-president of the Fed, Michael Barr, believes that the current restrictive policy must last for some time before being able to curb inflation.
On Monday, he and the other vice-president of the institution Philip Jefferson had already reiterated that interest rates will remain high for longer than expected, favoring a cautious approach after the rebound in inflation. On Wednesday, investors will also look at the latest British inflation figures. Inflation in April “should show a decline, to 2.1% (over one year) against 3.2% in March, paving the way for an upcoming rate cut by the Bank of England”thinks Neil Wilson of Finalto.
The governor of the British institution, Andrew Bailey, for his part, confided Tuesday evening during a conference at the London School of Economics that he expected “a clear decline in the figure” inflation. “I think the next step will be a rate cut”, he warned, without the British currency reacting immediately. Finally, gold fell 0.26% to $2,419.70 per ounce, falling from its new record reached the day before, at $2,450.17.
