The U.S. Labor Department's consumer price index reading on Tuesday, also the first day of the Fed's meeting, is expected to show inflation cooled slightly in May but core prices are likely to have remained elevated.
Traders see a 74% chance of the central bank holding interest rates at the 5%-5.25% range on Wednesday, while pricing in a 51% chance of a 25-basis-point increase in July, according to the"The Fed is continuing to walk this very fine line between are we going to tighten too much and drive the economy into a recession or are we not going to tighten enough and keep inflation high," said Melissa Brown, global head of applied research at Qontigo.
"Until we see several months of low or declining inflation, the headline number is still going to be above the 2% target that the Fed has set. The market does seem to think that rates are going to stay stable."
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