Global investors will be watching the next set of US CPI data with bated breath. This week, the Bureau of Labor Statistics will release the most recent US inflation numbers for April. The April 2023 CPI statistics will be released on May 10, 2023, at 8:30 am Eastern Time or 6 pm IST. The April US inflation report is expected to provide cues if the Federal Reserve will pause rate hikes next month. The FOMC meets on June 13-14 to decide on the policy rates.

Annual inflation was 5% in March, while the monthly price increase was only 0.1%. Despite falling from a decade high of 9.1%, inflation remains significantly higher than the central bank’s target rate of 2%. The core inflation figures are more essential than the headline inflation figures. The core inflation index, which excludes food and energy and is closely tracked by the Fed, rose by 5.6% in March.

Markets anticipate that inflation will remain unchanged at 5% in April. This could be due mostly to higher oil prices in April. The announcement by OPEC+ on April 2 of an unexpected drop in crude production caused oil prices to skyrocket.

Sticky inflation and rising core-inflation data could lead to a market downturn. In such a circumstance, the Fed will be forced to maintain its aggressive tightening policy, and more bad news for the banking industry and economy may follow. If inflation remains low, the Fed may decide to pause and examine the economic implications of a no rate hike before deciding on rate cuts.

The June FOMC meeting will be the focus of attention in the coming months. The US Fed is expected to take a breather and pause any future rate hikes in June if new data supports their view. The Fed anticipates early rate hikes to have a lag, so a delay might allow them to examine data more closely. The Federal Reserve Bank of New York’s President and Chief Executive Officer, John C. Williams, is scheduled to speak a day before the US CPI data is revealed on Wednesday.

Fed Chair Powell stressed last Thursday that policy decisions would be “driven by incoming data.” Meanwhile, China’s statistics bureau will announce inflation estimates on Thursday. Further, the Fed’s Senior Loan Officer Opinion quarterly poll found that commercial and industrial loan criteria have become more stringent, which may have a detrimental influence on economic growth.

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