News The Balance Today: News You Need To Know on Dec. 12, 2022 What To Watch for This Week: Inflation Report, Fed Decision By Kristin Myers Updated on December 12, 2022 Fact checked by Yasmin Ghahremani Photo: Grace Cary / Getty Images Watch out, it’s going to be a big week for the economy and the markets. Tomorrow, not only will the Federal Reserve kick off its last two-day policy meeting of the year, but the Labor Department will also release November inflation figures in the form of the Consumer Price Index (CPI). The CPI number is watched closely by investors and inflation-minded shoppers alike as we all look to see if prices of goods and services are easing—and by how much. Last week we got a first look at November inflation when wholesale prices tracked in the Producer Price Index showed that inflation, while decelerating from the month prior, still rose more than economists expected. If tomorrow’s CPI figures don’t slow down and the pace of price increases remains persistently high, expect stocks to react badly. In other words, you might not want to look at your retirement accounts tomorrow to avoid the potential heartache. Investors have been anxious about inflation, because high levels of inflation mean that the Fed will continue to stay aggressive with rate hikes going forward. The last four rate hikes have been 75 basis points. But currently, markets are pricing in a 77% chance that the central bank will hit us with a more moderate rate hike of 50 basis points. The Fed starts its meeting tomorrow, but we will have to wait until Wednesday for a decision on rates. While policymakers at the bank have made it clear that they will continue to raise interest rates, there is still a big question mark around how high they will raise them, and for how long. The higher rates go, the more painful the squeeze on all of us. Not only does it make borrowing money more expensive (think, higher interest rates on bank loans, like mortgages), but that in turn pumps the brakes on the U.S. economy. An economic slowdown tends to bring higher levels of unemployment, smaller pay bumps (or no raises at all), and the potential of a recession. Stocks are rising today ahead of the key economic reports and the next Fed decision. For those of you keenly watching the market (and your portfolio), don’t be surprised if there is volatility. -Kristin Was this page helpful? Thanks for your feedback! Tell us why! Other Submit Sources The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy. Federal Reserve. "Open Market Operations." CME Group. "CME FedWatch Tool." Federal Reserve. "Speech, Nov. 30, 2022, Inflation and the Labor Market, Chair Jerome H. Powell."