Both financial equity and bond markets are looking forward to the United States Consumer Price Index (CPI) data release. Analysts predict inflation will still be well above the Federal Reserve’s target when November arrives. Optimistically, investors will be looking at this new key economic indicator for any good news. So they’re looking to see how it can inform future monetary policy and market performance.
The upcoming US CPI data—scheduled to be released any day now—will be instrumental in revealing where inflation stands arguably more than any other CPI release this year. Economic analysts have been suggesting that these forthcoming numbers will indicate continuing inflationary pressures. This points to the difficulty the Federal Reserve will have in reigning in price appreciation. Once this data begins to be released, it will have a critical impact on setting market expectations and investor sentiment.
As US CPI steals the headlines, so too has the Bank of England (BoE). Speculation is ongoing and rife regarding a forthcoming dovish manoeuvre from the central bank. Should the BoE choose to adopt a more lenient stance on interest rates, it could signal a shift in approach amid ongoing economic uncertainties. The market is clearly on the lookout for a BoE policy U-turn. Expectations are palpable in the lead-up to their first big meetings.
Meanwhile, the European Central Bank (ECB) is expected to hold its key interest rates firm as well. With that, his reassuring demeanor invites a sense of calm in facing the stormy economic waters we all face. The ECB’s decision to hold rates steady suggests that it remains cautious about global economic conditions and their implications for the Eurozone. This action further fits the Board’s general approach to prioritize stability over risk, while wading into dangerous territory.
While investors continue to look toward these monumental economic catalysts, attention is turning to how these indicators will change the underlying market dynamics. All eyes were on the US CPI print and the Fed and other central bank decisions. If the latter is truly what the data is pointing towards, we may find ourselves with a year-end equities rally in our midst.