US inflation data is the main event today
Financial markets are turning their attention today to the data of the US Consumer Price Index (CPI), which is the most influential indicator on the expectations of the Federal Reserve's monetary policy.
What are the forecasts for the US inflation index
The report is expected to show a slight increase in annual core inflation to 2.9% compared to 2.8% previously, while the monthly rate may rise to 0.3% compared to 0.2% in the previous reading.
Analysts expect that this increase will be due to the impact of new tariffs, which may put pressure on prices.
However, Fed officials have indicated that they will monitor the impact of these external factors, especially if the intensity of trade tensions subsides.
The impact of data on Fed policy
The Fed previously confirmed that a rate cut in the second half of 2024 remains an option, but stressed that the decision will depend on the course of economic data.
If economic indicators continue to strengthen, or the deflationary trend of inflation slows down, the reduction may become more complicated.
Currently, the market expects a reduction of 44 basis points by the end of the year, equivalent to one or two cuts.
But these forecasts may change based on the results of the report today:
- If the figures are higher than expected: this may lead the market to expect only one cut, and may even further reduce expectations.
- If the figures are lower than expected: this may reinforce expectations of two or even three cuts, especially if the data show a slowdown in economic growth.
