Stock markets facing inflation and debt crisis. What will the week bring?

Last week's inflation reading in the United States positively surprised. The headline index recorded its tenth straight decline, and core inflation also moved slightly downwards. The process of disinflation across the ocean is favored by several factors - the first of them is a sharp drop in fuel prices, and food prices also record a significant drop. How will the Fed react to the latest inflation data? Will the debt crisis change attitudes? Federal Reserve?

Inflation is not the only problem

Looking at the contributions, in the next two months the negative impact of fuel prices on the level of consumer inflation in the United States should accelerate significantly. Due to lower gas prices, in the near future we can also count on a negative contribution from the media. A strong decline is also observed in the case of inflation in services. The key issue, however, remains the question of how long this process of slowing down price growth will continue. Jerome Powell often referred in his statements to the case of the 70s, when, after a period of falling inflation, the pressure to increase prices returned with redoubled power. The Fed will certainly want to avoid repeating the same mistake, so high interest rates are likely to stay with us for longer.

The current situation in the US is also complicated by the fact that we are again dealing with protracted talks on the debt limit. This was already achieved in January, however, extraordinary actions by the Treasury Department allowed the government to act until June 1. The US was close to 'bankruptcy' in 2011 - then the Standard & Poor's agency even decided to downgrade the US debt rating. According to Moody's, this could lead to up to a 30 percent sell-off on Wall Street. Does the current situation on the S&P 500 chart favor such a scenario?

In today's webinar:

• What next for the level of inflation?
• Can the United States go bankrupt?
• How have the valuations of stock indices changed?

About the host

Dr Przemysław Kwiecień - Chief economist X-Trade Brokers. Doctor of Economics at the University of Warsaw, graduate of the University of Warsaw and London Metropolitan University (MSc). Holder of the prestigious CFA certificate. He has been working for XTB since 2007, previously he gained experience as an advisor to the Minister of Finance, Mirosław Gronicki, and an economist at Bank Millennium. At XTB, he manages the Analysis Department.

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