Markets Brace for Pivotal Week Amid CPI Inflation, Fed Meeting
Next week is expected to be another volatile one, as investors brace for two of the biggest economic events that remain for 2023.
On the economic calendar, the most important will be Tuesday’s U.S. consumer price inflation report for November, which is forecast to show annual CPI continues to cool.
Meanwhile, the Federal Reserve will announce its rate decision at its last meeting of the year on Wednesday. No action by the central bank is seen as the most likely outcome, as investors believe the Fed is all done tightening.
Taking that into account, the week ahead promises significant movements, and its impact will likely ripple through the stock market for months to come.
Here’s what to watch out for:
With investors now firmly expecting a Fed rate cut in March, next week’s U.S. CPI inflation data takes on added significance.
As per Investing.com, the consumer price index is forecast to inch up 0.1% on the month after a flat reading in October. The headline annual inflation rate is seen rising 3.1%, slowing from a 3.2% annual pace in the previous month.
A cooler-than-expected print, which sees the headline figure fall to 3% or below, would add to the rate-cut fervor, while a surprisingly strong reading would likely keep pressure on the Fed to maintain its fight against inflation.
As seen in the chart below, U.S. inflation has come down considerably since the summer of 2022, when it peaked at a 40-year high of 9.1%, amid the Fed’s aggressive rate-hiking cycle.
Meanwhile, the November core CPI index — which does not include food and energy prices — is expected to rise 0.2% in the month, matching the same increase in October. Estimates for the year-on-year figure call for a 4.0% gain, the same as in the previous month.
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