All eyes will be on the US inflation data as it will help frame expectations for interest rate hikes from the US Federal Reserve. With a further 25 basis point rate hike all but fully priced in to the next Fed meeting on 21 March, the inflation data will help form views on how many interest rate hikes will be needed in 2018 to ensure the pace of economic growth is consistent with the target.
In the current cycle, the Fed has already hiked interest rates five times (each 25 basis points) to 1.5 per cent and the market is expecting rates to reach 2.5 to 2.75 per cent during 2019. If inflation continues to accelerate, interest rates would need to rise by more than this to ensure the target is maintained.
Source: Trading Economics
