Inflation Decline May Trigger Rate Cuts
As global markets await key economic data from the United States, analysts at Commerzbank suggest that signs of economic reasoning are beginning to re-emerge in the country’s trade and monetary policies—signals that could shape the trajectory of the US Dollar in the coming weeks.
On Friday, the White House announced a new initiative aimed at easing tariff pressures. A wide range of agricultural products—including coffee, meat, tomatoes, and coconuts—were added to the list of exceptions from reciprocal tariffs. The stated goal is to reduce inflationary pressure on US consumers.
Michael Pfister, senior FX analyst at Commerzbank, commented: “The rationale behind this move is that domestic production of these goods is insufficient to meet demand. However, the logic is riddled with inconsistencies—coconuts, for example, are hardly abundant in the United States.”
While the United States is attempting to lower prices through tariff reductions, Brazil—one of the world’s largest agricultural producers—remains subject to punitive tariffs of 40%. Officials have long claimed that tariffs do not raise prices, yet now they argue that lowering tariffs will reduce them.
Pfister adds: “Let’s not kid ourselves—this adjustment is designed to shield US consumers from the inflationary effects of tariffs. Affordability was a central issue in the recent elections, and lower food prices are expected to help in that regard.”
Fundamentally, lower inflation should open the door to further interest rate cuts. In recent weeks, market expectations for a December rate cut had diminished, but this outlook may shift again following the latest developments.
These adjustments and renewed expectations are among the key reasons for the continued resilience of the US Dollar against other currencies. However, whether this strength will persist remains to be seen—especially as more critical US data is released this week.
With trade and monetary policies undergoing recalibration, markets are looking for signs of stability and economic logic. Lower inflation, tariff revisions, and the possibility of rate cuts are all factors that could influence the path of the US Dollar in the near term.