U.S. inflation data is set for release later today at 16:30 Dubai time, with markets awaiting the actual reading compared to the expected and previous data. Expectations indicate that inflation will stabilize on a yearly basis at 3.1%, unchanged from last month's reading. This inflation report is one of the most critical data points that affect the Fed's decisions.
From the Fed's point of view, inflation is still far from the central bank's 2% target, suggesting that monetary tightening should continue while inflation remains high. On the other hand, the market outlook shows optimism that this reading may prompt the Fed to start lowering interest rates.
If today's reading is higher than 3.1%, the Fed may postpone rate cuts, given that inflation is still high and higher than the central bank's target. Analysts expect this scenario to positively impact the U.S. Dollar while negatively impacting stocks and oil. However, if inflation rates decline below 3.1%, the Federal Reserve may start reducing interest rates, given that inflation is moving towards the Fed's target.
Today's CPI release may be accompanied by fluctuations in the financial markets. Traders should remember that the initial market reaction, regardless of the nature of the reading, may be sharp and volatile before markets return to stability. Also consider that all traders have different ideas about interpreting the information issued. Therefore, prices cannot always move 100% according to that information.
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