The highly anticipated US consumer prices and sentiment report came out on Friday, showing that inflation increased a lot more than expected last month. In fact, the figure was the highest since 1981 at 8.6%. Because the Fed has been hiking rates since March, many were hoping that it would reign in inflation, but with the Ukraine-Russia war as well as supply chain headaches, the Fed’s road to calming inflation has been filled with bumps.
The Fed is widely expected to increase the funds rate by a half-point on Wednesday next week, with many worried it could be more aggressive or faster, sparking an economic slowdown. With that, there’s an extra bright spotlight on the Fed’s press briefing on Wednesday for many looking for reassurance that the central bank can pull it off without starting a recession.
“I think really, the key thing is what Powell talks about in the conference and does he give anything that sounds like firm guidance for September. If he does, he would only do it if he was going to be hawkish, and if he doesn’t, people will view it as dovish," said Michael Schumacher, head of macro strategy at Wells Fargo.
“The US central bank now has good reason to surprise markets by hiking more aggressively than expected in June. We realize it is a close call and that it could play out in either June or July. But we are changing our forecast to call for a 75 basis point hike on June 15," wrote Barclays economists after the report came out on Friday.