Analysis of US Inflation Data

US inflation data will be released today at 3:30 pm Amman time and 4:30 pm Dubai time, and the markets are awaiting what the real reading will be compared to what is expected and compared to the previous reading. Expectations indicate that inflation on an annual basis is expected to slow to 3.1%. This data is considered one of the most important data that affects the Fed’s decisions, especially since from the Fed’s point of view, inflation is still far from the target levels of 2%, and Monetary tightening continues as long as inflation rates remain at high levels

On the other hand, the market shows optimism that this reading will push the Federal Reserve to begin lowering interest rates during the upcoming meetings, given that the economic data released during this month, most of which indicated a decline and slowdown in the American economy, prompting a decline in the gross domestic product, and an increase in Unemployment rates are at the highest level in 3 years, so if we witness any decline in inflation rates today, this may encourage the Fed to change its monetary policy, considering that this is the last reading of inflation data before its meeting at the end of this month.

Expected scenarios by the analyst: 

If today’s reading is higher than 3.1% and higher than 3.3%, this may prompt the Fed to postpone the date of reducing interest rates, given that inflation is still high and higher than the Federal Reserve’s target. Analysts expect this to positively impact the US dollar and negatively impact gold and stocks.

If inflation rates decline to less than 3.1%, the Fed may discuss reducing interest rates at its next meeting, given that inflation is moving towards the target.