Market Volatility Anticipated as CPI and Inflation Readings Awaited

The release of the CPI report on May 10 is expected to create market volatility as the Fed shifts to a data-dependent approach, with hot data driving more rate hikes. The April report holds importance as year-over-year comparables are forecast to ease between now and July, and any deviation in the data could devastate those expecting inflation to return to the Fed's target soon. The persistently tight job market and increasing wages also indicate that the demand for workers shows no signs of easing. Rising short-dated implied volatility is expected before and after the data release, and each data point will take on greater importance and meaning, particularly heading into the June FOMC meeting.