Stock investors are on high alert as they await the release of Wednesday’s Consumer Price Index (CPI) data for December, which may indicate a shift in inflation trends. The CPI is expected to show an annual headline rate of 2.9%, up from 2.7% in November and a three-month decline since April.
This reading has significant implications for the stock and bond markets. If the actual rate meets expectations, it could signal that inflation is nearing its peak, potentially leading to further interest rate cuts by the Federal Reserve. However, if the rate exceeds expectations, investors may be in for a surprise, which could lead to market volatility.
The stakes are high because investors are exposed to both upside and downside surprises from the CPI report. A rise in inflation rates could lead to higher borrowing costs, harming growth prospects, while a decline might indicate that the worst of the inflationary period has passed.
Source: https://www.marketwatch.com/story/stock-investors-brace-for-possibly-the-most-important-inflation-reading-in-recent-memory-292c7cd5