The next day the inflation report will be released. This data is among the most awaited data by many parties because it is able to influence the Fed in making decisions about rate hikes.
The January consumer price index, which will be released on Thursday, is one of the most important data releases ahead of the central bank meeting in March, which Chairman Jerome Powell has hinted will begin a series of interest rate hikes.
A reading above the projected annual inflation rise of 7.3% is likely to pressure the Fed to consider its first half percentage point increase since 2000.
Powell said last month he would not rule out a half -point increase, coupled after an unexpectedly strong January jobs report in which the reading exceeded all estimates. Market players are increasingly confident that the Fed will be more aggressive. Based on the Fed’s futures funds, they now see a one -third chance of a 50 basis point increase, compared to one -fifth before the jobs data.
Given a strong labor market today, the Fed’s reaction function depends on one inflationary variable. Even so, it is a risky move for Powell, who is awaiting confirmation to lead the country for the next four years.
Critics say the Fed has been too slow to act and is now lagging behind in tackling inflation, and a move to raise by half a point is justified.
For President Joe Biden where his party risks losing a slim congressional majority in the mid -year election it is even more important that Powell does it right.
