19.12.202501:58:14UTC+00Dollar Set to End Week Little Changed

The dollar index remained around 98.4 on Friday, closing the week relatively stable as investors considered the possibility of further interest rate reductions by the Federal Reserve next year. This speculation arises amid signals of softening inflation and labor market developments. November's Consumer Price Index (CPI) report revealed headline inflation at 2.7%, marking the lowest level since July and falling short of the market’s expectation of 3.1%. Core inflation also decreased to 2.6%, its slowest rate since early 2021. Additionally, earlier data indicated an increase in the unemployment rate to 4.6% in November, the highest since 2021. The convergence of modest inflation and a cooling labor market grants the Federal Reserve greater latitude to potentially lower rates in 2026, even though market expectations are for policy to hold steady in January. Meanwhile, former President Trump mentioned he would soon reveal his choice for the next Federal Reserve chair, anticipating significant rate reductions. Economic advisor Hassett, former Fed Governor Warsh, and current Fed Governor Waller are among those considered top contenders by the market.