Will the Fed Stop Raising Rates? Markets Keep an Eye on This Week's Inflation Data

This week's US inflation data will provide clues as to whether the Federal Reserve will pause in raising interest rates at next month's meeting.
The market is now widely expecting the US core CPI excluding food and energy to rise by 5.4% year-on-year in April, after rising by 5.6% in March. This data may indicate that inflation is slowing only slightly and that underlying price pressures are continuing.
Core inflation in the US has hovered between 5.5% and 5.7% over the past four months, highlighting the stickiness of inflation. Two more CPI reports will be released ahead of the Fed's June meeting, with Wednesday's report being the first.
In addition to CPI, the US will also release PPI data on Thursday. Economists expect cost pressures to have increased in April compared to the previous month. Forecast data show that both the US PPI and core PPI, after falling by 0.5% and 0.1% respectively MoM in March, rose by 0.3% in April from a month earlier. These data may indicate that the downward trend in commodity prices may be zigzagging.
The Fed's resolution last week to continue to raise interest rates by 25 basis points was in line with widespread market expectations and hinted that the cycle of rate hikes may be coming to an end. Despite the slow progress in curbing inflation, the Fed must take into account the recent pressures on regional banks and the impact of its year-long move to raise interest rates on the economy.
However, Fed Chairman Jerome Powell "left a small door open" for continued rate hikes in the future at a press conference.
The analysis says that Powell hinted at the May FOMC meeting that interest rates may have been "tight enough", but he needed more time to observe developments before he could make a confident judgment. The April CPI and PPI data will not be reassuring, and both are expected to show an acceleration in overall inflation.