Dollar surges as Fed board members consensus on prolonged high interest rates

The Reserve Bank of Australia

As expected, Australia's central bank held interest rates steady for a fourth month. The Reserve Bank of Australia (RBA) held rates at 4.10% and said recent data were consistent with inflation returning to its 2-3 percent target over time with output and employment still growing. But again, it warned that further tightening might be needed to bring inflation to heel in a reasonable timeframe.

Federal Reserve

While Fed policymakers disagree on how high US rates should go, there seems to be no discussion that monetary policy will need to stay restrictive for "some time" to bring inflation back down to the Fed's 2% target. Yesterday, Federal Reserve (Fed) Governor Michelle Bowman said that despite considerable progress, "inflation continues to be too high, and it will likely be appropriate for the Fed to raise rates further and hold them at a restrictive level for some time."

Speaking at a separate event in New York on Monday, Fed Vice Chair for Supervision Michael Barr said that "the most important question at this point is not whether an additional rate increase is needed this year or not, but rather how long we will need to hold rates at a sufficiently restrictive level to achieve our goals," and adding, "I expect it will take some time." And Cleveland Fed leader Loretta Mester also said yesterday that the Fed's work was likely not done. "I suspect we may need to raise the fed funds rate once more this year and then hold it there for some time."

The US dollar

Monday was another strong day for the USD. The greenback found extra support in the latest ISM services Purchasing Managers (PMI) data. The index rose to 49, still in contraction territory, but an improvement on the 47.6 recorded the previous month and beating expectations of 47.7. On Tuesday afternoon, Job Openings and Labor Turnover Survey (JOLT)'s job openings are expected to remain broadly unchanged from last month, when they fell to their lowest since May 2021.

On Wednesday, Automatic Data Processing (ADP) employment change is expected to slow for a third straight month. 160,000 job creations in the private sector are forecast, after 177,000 in August. And on Friday, we'll get September non-farm payrolls. There too, job creation is forecast to slow down. Early expectations are for 163,000 dollars added to the US economy.

Boohoo

Elsewhere on the equity market, Greggs posted a 14.2% rise in company-managed like-for-like sales, Boohoo pretax loss widened in the first half, and Ryanair passenger traffic rose 9% in September.