Following another disappointing inflation print on Friday, Federal Reserve (Fed) Chair Powell is likely regretting his decision to take a 75-basis-point (bp) hike off the table during his May post-Fed meeting press conference. Futures markets repriced quickly on Friday and are now pricing in a 1 in 4 probability of a 75 bp hike at this week’s Fed meeting and a total of 175 bps by the September Fed meeting. After an unexpectedly dovish takeaway from the May meeting, Chair Powell will need to reverse course and set a more hawkish tone this Wednesday – leaving all options on the table for the remainder of the year.
This week’s economic calendar will provide Fed policymakers another look at inflation data with the Producer Price Index coming out Tuesday morning followed by Import Prices on Wednesday. Retail Sales will be released on Wednesday and Housing Starts Thursday. Both measures will give a read to gauge the impact of high inflation and rising interest rates on the state of the U.S. consumer.
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