Market Braces for Searing Inflation Data Ahead of June Rate Decision
As investors await Wednesday's US Consumer Price Index (CPI) release, expectations are running high for a hot inflation print. The market has already priced in a near-certain rate hike by December, with a 98% probability of a 25 basis-point increase, according to LSEG data.
The strong May payrolls report earlier this month effectively extinguished rate cut expectations that had been on the table before the US-Iran conflict began. Now, analysts are closely watching whether energy-driven inflation is bleeding into core categories, which would give the Federal Reserve little room to hold off further tightening.
Wednesday's CPI release, due at 8:30 am US Eastern time, will be a critical test ahead of the Fed's June 17 meeting. A hotter-than-expected print would make it very difficult for policymakers to argue for further easing, given inflation is already running persistently above the Fed's 2% target.