US CPI Data: A Nail In The Coffin For The Fed’s Hiking Cycle?

US inflation data is set for release today at 16:30 GMT+4 as markets anticipate how the real reading will compare to both the expected and previous readings. Forecasts indicate that annual inflation will continue to slow down for the ninth consecutive month to 5.2%, compared to the previous 6.0% figure. This would be its lowest reading in around two years.


Still, the Fed continues to stress the need for inflation to return back toward its 2% target, also making it clear that its upcoming monetary policy decisions will depend on the economic data. Markets will therefore be focusing on whether today’s inflation reading indicates further optimism and justifies an end to the Fed’s interest rate hikes, or whether the central bank has more work to do.


The release of today’s CPI inflation data will most likely be accompanied by fluctuations in the financial markets. The initial market reaction, regardless of the nature of the real reading, may be highly volatile upon release before the market returns to stability.



The expected scenarios are as follows:


  • Reading is higher than the previous reading (6.0%)


This would translate into fears of resurging inflation again, potentially pushing the Fed to continue interest rate hikes at a strict pace. According to analysts, this could positively affect the US dollar and negatively weigh on stocks and gold.


  • Reading is at or below expected (5.2%):


Perhaps this will convince the Fed to halt the pace of interest rate hikes, something that could negatively affect the dollar and positively impact stocks and gold, according to analysts.


  • Reading is between the expected and previous (between 5.2% and 6.0%):


This will be the most confusing situation for markets, potentially leading to additional volatility before prices take a specific direction.


It is important to note that traders have different ideas and convictions in the way they interpret the information issued, and therefore prices cannot move 100% according to that information, while the expected scenarios will be as follows:




The content published above has been prepared by CFI for informational purposes only and should not be considered as investment advice.  Any view expressed does not constitute a personal recommendation or solicitation to buy or sell.  The information provided does not have regard to the specific investment objectives, financial situation, and needs of any specific person who may receive it, and is not held out as independent investment research and may have been acted upon by persons connected with CFI.  Market data is derived from independent sources believed to be reliable, however, CFI makes no guarantee of its accuracy or completeness, and accepts no responsibility for any consequence of its use by recipients.