The US dollar weakened on Tuesday after a top Federal Reserve official said only one interest rate hike would be appropriate this year and that no action was necessary in 2027. His comments came ahead of the highly anticipated September Consumer Price Index (CPI).

The US Dollar Index (DXY), a measure of the greenback against a weighted basket of currencies, fell 0.4% to 102.21, from an opening of 102.57. The index had posted a 0.8% gain last week and is up 4% year-to-date.

In a Tuesday interview with Bloomberg News, New York Fed President John Williams said a single rate hike would be appropriate this year, meaning an increase is likely at the October or December policy meeting.

However, the major comments that moved markets were that he does not see any rate hikes as necessary for 2027.

While he cautioned that he is data-dependent, Williams reinforced his stance that he sees inflation as largely driven by the artificial intelligence (AI) infrastructure buildout and a war-driven energy shock.

Williams told Bloomberg that he has yet to see significant evidence that this is bleeding into prices across the broader economy.

“I haven’t changed my view that it may be appropriate to have one more rate hike. I don’t think at this time I have any reason to believe that we would need to do more,” Williams said.

The Federal Reserve will get one major piece of inflation data tomorrow: The September CPI.

Economists see the annual inflation rate rising to 3.6%, with core inflation inching up to 2.5%. This will be the last major price report before the central bank convenes its October Federal Open Market Committee meeting later this month.

The Producer Price Index (PPI) for September will also be released on Thursday.

The USD/CAD currency pair fell 0.48% to 1.4215, from an opening of 1.4282, at 18:42 GMT on Tuesday. The EUR/USD climbed 0.39% to 1.1200, from an opening of 1.156.