U.S. CPI in January will become the litmus test for the Fed’s fight against inflation

U.S. stocks and cryptocurrencies have experienced their worst week so far in 2023. Wall Street has increased its bets on peak interest rates. The market had previously believed that the Federal Reserve would only raise interest rates once in March, but now it is facing at least three more interest rate hikes. bet

Next Tuesday's CPI is seen as a litmus test of the Fed's ability to rein in inflation during its most aggressive tightening cycle in decades. Core CPI either signals the need for further policy tightening or reflects their progress in stabilizing inflation expectations

As investors' New Year's optimism has quickly faded following the jobs report, investors are now leaning towards expecting higher-than-expected risks in core CPI, rather than the consensus of 0.4% month-on-month growth.

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