How will the markets be affected by U.S. inflation data and the potential shock that may unsettle the Federal Reserve: Jerome Powell, the Chairman of the U.S. Federal Reserve, presented his views at the last December meeting on the central bank’s success in taming high inflation rates,
which dropped to 3.1%. This led Powell to suggest the possibility of the Fed starting to taper within the current year.

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How upcoming inflation data will be interpreted?

Higher-than-expected U.S. inflation

Lower-than-expected U.S. inflation

A shock that may unsettle the U.S. Federal Reserve

How upcoming inflation data will be interpreted?

On Thursday, the markets await the annual U.S. Consumer Price Index (CPI) data, with experts anticipating a positive reading of around 3.2%,
compared to the previous reading of 3.1%. The monthly CPI is also expected to show a positive reading of around 0.2%, compared to the previous 0.1%.

Higher-than-expected U.S. inflation

A resurgence in U.S. inflation above expectations would qualify the ongoing upward trend of the U.S. dollar that began this year.
This is because expectations at that time would focus on the possibility of the Fed starting the taper late in the current year.

Lower-than-expected U.S. inflation

The idea of a decline in U.S. inflation strengthens the position of the U.S. Federal Reserve.
Faced with the scenario of an early reduction in high interest rates, this could potentially negatively impact the pricing of the U.S. dollar index.
On the other hand, we might witness positive movements in gold.

A shock that may unsettle the U.S. Federal Reserve:

After Jerome Powell raised the issue of reducing U.S. interest rates, which reached 5.50% by the end of 2024,
markets began to anticipate the taper starting in late March of the coming year.
However, the recent positive U.S. employment figures contributed to lowering those expectations.
, the markets eagerly await Consumer Price Index data, reflecting U.S. inflation levels.
annual consumer prices rise above 3.2%, it could signal a return to rising inflation with an acceleration.
This might prompt the Federal Reserve to taper later in the current year
or start at the end of 2024, potentially causing clear damage to the U.S. economy, especially with the extended period of keeping interest rates high.
Conversely, we may see a decline in economic growth rates, with the Federal Reserve expecting 1.4% growth during the current year.

How will the markets be affected by U.S. inflation data?

How will the markets be affected by U.S. inflation data

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