Investors face a familiar set of concerns this week in markets with a combination of geopolitics, economic data, and Federal Reserve policy influencing sentiment.
The US Consumer Price Index (CPI) for February will be a critical data point this week, with inflation data set to shape expectations for future monetary policy.
Analysts at Bank of America expect that headline and core inflation rose 0.3% month-over-month.
“This would be notable moderation from January, but it would still imply a run-rate well above levels consistent with the Fed's 2% target,” analysts wrote.
On an annual basis, analysts believe headline should edge down to 2.9% and core to 3.2%.
From Deutsche Bank’s perspective, the inflation data is crucial as the Federal Reserve approaches its March meeting. The bank expects moderate gains in both CPI and Producer Price Index (PPI) this week, with the headline CPI forecast at +0.27%, down from +0.47% last month.
“While the Fed is widely expected to remain on hold at the March meeting, the inflation data will be an important input for officials' updated economic projections,” Deutsche Bank analysts wrote, stressing how these figures will influence the Fed's outlook for the second half of the year.
Kathleen Brooks, Research Director at XTB, warns of the potential impact from last month's tariffs, which may cause upward pressure on inflation, exacerbating market jitters. “If there is no improvement in the shelter index, then we could see the dollar stage a broad recovery later this week.”
More jobs data
Alongside inflation data, the jobs market remains a critical factor for the Fed’s policy decisions. Brooks noted that the labor market will continue to be closely watched, with particular attention to the Job Openings and Labor Turnover Survey (JOLTS) and initial jobless claims. A weaker labor market could push the Fed towards more rate cuts.
Deutsche Bank echoed this sentiment, stating that the latest job report showed steady gains, but “the spike in the U-6 rate (a broader measure of underemployment) was notable.” Despite this, the firm believes that the labor market remains solid, and as long as this trend holds, the Fed is likely to stay on hold through the year.
Notable earnings this week include Oracle on Monday, Adobe on Wednesday and Dollar General on Thursday.