Investors globally will be keenly looking forward to the recent set of US inflation numbers. Market participants are concerned about the prospect of higher interest rates as key US inflation data gets released this week. The US CPI data for January 2023 will be released by US Bureau of Labor Statistics (BLS), February 14 at 8:30 A.M. Eastern Time. Tuesday’s inflation update from the US may offer a relevant potential inflection point for the stock market.

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Fed Chair Jerome Powell has stated that rates could peak higher than expected if the labour market remains strong and inflation numbers do not fall, putting an end to hopes of a pause in rate hikes. Investors are, meanwhile. anticipating a lower US inflation on Tuesday, which could influence the rate outlook.

The consumer price index report due out on Tuesday is expected to show a slowing of annual price growth to 6.2% in January. The core CPI, which excludes volatile food and energy components and is thought to be a better underlying indicator than the headline figure, is expected to rise 0.4% month over month and 5.5% year on year.

In December 2022, the annual inflation rate in the United States fell for the sixth consecutive month to 6.5%, the lowest level since October 2021, in line with market expectations. It follows a reading of 7.1% in November. On the back of cooling inflation and the hope that the Fed may turn dovish anytime soon, markets have rallied with S&P 500 gaining nearly 14% from October lows.

The Bureau of Labor Statistics will alter how it computes inflation data as of 2023. The switch to yearly weights will start on Friday, February 14, 2023, with the publishing of the CPI statistics for January 2023.

Also Read: US CPI data to be released on February 14 – Check new method for computation of January inflation

The stock market’s muted reaction to the past two months of better-than-expected CPI prints suggests that US equities may have already priced in slowing inflation. Back in 2022 when inflation was climbing, S&P 500 fell on seven of the 12 reporting days. Now that the scenario has shifted, it remains to be seen how the market reacts, particularly if a surprise element emerges.

Meanwhile, the market may have to wait a little longer this time as the next Fed’s next FOMC meeting is on March 21-22 and the decision on rates gets announced on March 22.

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