MUFG Research maintains Fed rate outlook post this week's soft US inflation data.

"The US inflation data released this week supports our view that the Fed is likely to leave rates on hold this year contributing to a re-weakening of the US dollar. The key test will be inflation data released over the summer alongside developments in the Middle East," MUFG notes.

"Our forecast for the Fed to leave rates on hold was also supported by some dovish comments yesterday from Fed Chair Kevin Warsh when speaking about the near-term inflationary impact from surge in capital investment related to AI...The comments indicate a willingness to be patient with sources of inflation that he believed to be temporary, including demand from AI investment. In the medium-to-long run he remain optimistic that AI will deliver a positive supply shock to the US economy and prove disinflationary," MUFG adds.