Is the global economy on a tightrope? World shares are down as everyone eyes the latest US inflation update. Will the Federal Reserve cut interest rates next month, or will stubborn prices keep us guessing? Find out what’s really moving markets!

Global stock markets experienced a downturn as investors nervously awaited crucial U.S. inflation data, anticipating its significant impact on future monetary policy decisions by the Federal Reserve.

European equities opened lower, mirroring a mixed trading session across Asia, reflecting widespread investor caution. This global sentiment extended to U.S. futures and oil prices, which also saw declines despite recent gains in technology stocks propelling Wall Street to new record highs.

The market’s jitters were primarily driven by a closely watched inflation measure, which, upon release, indicated that prices largely held steady last month. While this offers some relief, the current inflation rate, though significantly down from its 7% peak three years ago, still comfortably exceeds the Fed’s long-term target of 2%.

Against this backdrop, Federal Reserve Chair Jerome Powell recently hinted at the possibility of an interest rate cut at the central bank’s upcoming meeting. This potential shift in policy comes amid growing signs of sluggishness within the job market, a key indicator the Fed closely monitors.

Lowering interest rates typically serves as an economic stimulus, reducing borrowing costs for both U.S. households and businesses. This can encourage investment and consumer spending, thereby boosting overall economic activity. However, such a move also carries the inherent risk of reigniting inflationary pressures.

Before making a definitive decision on interest rates, the Federal Reserve will carefully scrutinize two more critical inflation barometers: the Producer Price Index (PPI) and the Consumer Price Index (CPI). These reports will provide further insight into the broader economic landscape and inflation trends.

According to Chris Zaccarelli, chief investment officer for Northlight Asset Management, a significant spike in inflation from these upcoming reports is unlikely. He suggests that unless such a drastic increase occurs, a Federal Reserve interest rate cut next month is “almost guaranteed,” signaling a potential easing of monetary policy in the near future.