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Inflation Data Holds the Key This Week!

 
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    Find out what happening right now and get all the pieces of the puzzle on important data activity before the major news sources break the story and see what are the trends

     
 
 
 

Summary

 
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The Federal Reserve's interest rate decision on Wednesday is the marquee event, with expectations it will leave rates unchanged at 5.5%
 
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Key economic data includes U.S. inflation readings, Eurozone CPI, housing starts, and PMI numbers
 
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Notable company earnings reports include XPENG, Micron, Nike, Lululemon, FedEx, and Nano Dimension
 
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The Fed is expected to signal more rate hikes coming, but the path remains data-dependent
 

This week, all eyes will be on the Federal Reserve's latest interest rate decision and fresh reads on inflation as markets try to gauge the path forward for monetary policy. A host of key economic data and corporate earnings results will also help shape the investment landscape. Here are the major events investors need to watch:

 

Fed Interest Rate Decision

 

On Wednesday, the Federal Open Market Committee (FOMC) is widely expected to leave the benchmark federal funds rate unchanged at 5.5%

 

However, the Fed's statement, economic projections, and comments from Chair Jerome Powell will be highly scrutinized

 

Based on recent inflation data, the Fed is likely to signal additional rate hikes are coming but keep a data-dependent approach

 

Inflation Data

 

U.S. consumer price index (CPI) data last week showed inflation rose 0.4% in February, pushing the annual rate back up to 6%

 

Core CPI, which strips out volatile food and energy, increased 0.5% month-over-month and 5.5% year-over-year

 

The stalling progress on disinflation, particularly in sticky service prices, could spur the Fed to take a more hawkish stance

 

Other Economic Reports

 

On Tuesday, February housing starts and building permits data will offer a pulse on the struggling residential real estate market

 

Eurozone CPI for February is also out on Thursday along with U.S. PMI numbers for March, gauging business activity

 
 

Earnings Reports

 

Companies Reporting This Week

 
 
 
 

While hopes were high for a pause in rate hikes, the latest inflation readings likely dashed those expectations. The Fed has consistently stated its commitment to taming inflation, even at the risk of an economic downturn.

 

The main reason for the slowdown in inflation now is related to the prices of services, whose annual rate has increased again in recent months.

 

Although there are signs of moderation in activity this is not a real weakness that justifies an interest rate cut, especially when the inflation environment continues to be problematic.

 

As a result, markets now anticipate the Fed will signal one or two more quarter-point rate increases are likely in the coming meetings. Projections from Fed officials will be scrutinized, with any shift in the "dot plot" of individual rate forecasts closely watched.

 

Penning expects the median dot plot to rise from three total rate hikes projected in December to just two for 2023. It is enough for two members to change their minds from three to two interest rate cuts this year for the Fed's (median) forecast to also drop to two cuts.

 

The dichotomy of slowing growth and stubborn inflation continues to create a challenging backdrop for investors to navigate. On one hand, the Fed's aggressive rate hike campaign has clearly dented economic activity and raised the risk of a recession if pushed too far. However, relenting too soon could let inflation become further entrenched.

 

Further clouding the outlook, geopolitical tensions threaten additional supply shocks that could feed inflationary pressures. Recent attacks on Russian oil refineries underscore the potential disruption.

 

In the last week, significant damage to Russia's oil refining capacity was reported by Ukraine. On Friday, Reuters estimated the damage to nearly 400 barrels of oil per day (about 0.4% of global capacity), and it seems that this will continue into the weekend. If this continues, we will definitely expect a market reaction.

 

Ultimately, this week's tsunami of data and information will go a long way in shaping the market's perspective on the Fed's remaining policy tightening path. Investors would be wise to pay close attention and position portfolios accordingly, as mixed economic signals raise the stakes considerably. Preparation and prudent risk management will be crucial to navigating the turbulent investing landscape that likely lies ahead.

 
 
 

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Please note that the article should not be considered as investment advice or marketing, and it does not take into account the personal data and requirements of any individual. It is not a substitute for the reader's own judgment, and it should not be considered as advice or recommendation for buying or selling any securities or financial products.

 
 
 
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