The CPI and core CPI data released yesterday performed well overall, and the market reacted positively.
Although today's PPI data is not as closely watched as the CPI, the PPI combined with the CPI can help estimate the core PCE, which is the key indicator the Federal Reserve is most concerned about.
The '2% target' mentioned by Powell refers to the core PCE falling to 2%.
Currently, market expectations are generally optimistic. If the actual data meets or falls below expectations, the possibility of core PCE being lower than the previous value will increase, which would undoubtedly be a positive for the market.
However, this optimism should be taken with a grain of salt.
At this stage, the data does not account for the newly adjusted +25% tariff factor. In other words, if tariffs are not considered, U.S. inflation is indeed slowly retreating.
But once the impact of tariffs is taken into account, the reference value of the existing data will greatly diminish.
The future direction of the market still requires continuous observation of the dynamic changes in policy.
