The US CPI inflation statistics will be released on December 13, 2022 (Tuesday) at 8:30 AM Eastern Time (ET). The November inflation figures are critical because they will most likely influence how the US Federal Reserve acts tomorrow which will impact US stock market investors directly. The Fed’s FOMC meeting is now underway on December 13-14, with the central bank likely to raise interest rates by 50 basis points on Wednesday.

The US economy is still dealing with 40-year-high inflation, which reached 8% in August. Annual inflation declined from 8.3% in August to 8.2% in September before falling further to 7.7% in October. A significant drop in November inflation data, particularly core inflation figures, may bolster stock market confidence by sending indications that the Fed may become dovish sometime in early 2023.

“Any number less than 0.3% for monthly Core Inflation Rate and less than 7.3% for Annual Inflation Rate would be seen favorably by the markets as it may lay the way for fewer rate rises and the much-anticipated Fed Pivot,” says Dhawal Ghanshyam Dhanani, Fund Manager, Samco Mutual Fund.

“Last month in November, Powell hinted that the US Fed may pause the pace of interest rate rises, and inflation statistics would be closely monitored,” Dhanani says.

US inflation statistics may affect interest rate rise forecasts for the future year, allowing the stock market to set the tone in 2023. The release of the November CPI data in the United States today will have an impact on how markets respond to the Fed’s message tomorrow. Inflation data has been one of the most important factors for US stock market investors.

“We anticipate the US Fed raising the benchmark rate by 50 basis points this week.” Even if the Fed raises rates by 50 basis points, the market will react positively if the Fed Chairman states that future Fed action would be data-driven. However, if he indicates that inflation is still a huge danger and that the job market is tight, with the likelihood of a second round impact on inflation from the tight labor market, the markets may respond badly,” says Naveen Kulkarni, Chief Investment Officer, Axis Securities PMS.

US equities climbed on Monday as the market braced for a critical week that included US CPI data and a Federal Reserve policy announcement. The Dow Jones Industrial Average rose 1.58%, while the S&P 500 rose 1.43%. The Nasdaq Composite rose 1.26%.

The spotlight will be on Tuesday’s US consumer price index report, which is expected to indicate that prices remain high but are slowing. According to JPMorgan Chase, the S&P 500 might gain up to 10% in the best-case scenario in response to lower CPI data; however, their analysis shows that the possibility of this happening is just about 5%. The US stock market investors reaction to November’s US CPI report remains to be seen.