A gauge of Asia Pacific equities and US futures were flat, a sign that investors were holding back on taking new positions before a data point seen as crucial for the next Federal Reserve policy meeting. Treasury two-year yields remained above 4%, while the dollar held Tuesday’s loss. 

US headline inflation is expected to slow, with the core reading forecast to ease both on a monthly and yearly basis. Expect the S&P 500 index to drop at least 2% should the year-over-year inflation rate come in above the previous reading of 6%, Goldman Sachs Group Inc partner John Flood wrote.

Fed officials offered differing comments on Tuesday about further policy increases, with Chicago Fed president Austan Goolsbee arguing that the central bank should exercise “prudence and patience”. New York Fed president John Williams said officials have more work to do to tackle inflation.

Swap contracts are pricing in about three-in-four odds of another quarter-point Fed hike next month. Traders predict US rates will peak around 5%, with policymakers then cutting by at least 50 basis points by year-end.

Some investors see the situation differently.

“The inflation picture for us in the US is still very, very mixed,” Dwyfor Evans, head of Asia-Pacific macro strategy at State Street Global Markets, said on Bloomberg Television. “It’s certainly not consistent with a rapid adjustment to the downside in interest rates. We don’t buy that view at all.” 

In currency markets, the yen fluctuated after falling for a fourth day on Tuesday. Other G10 currencies traded in a tight range. China’s 10-year bond yields fell to the lowest since November on expectations of more monetary easing.

Japanese stocks led gains in Asia, with sentiment boosted by Warren Buffett saying that he’s mulling buying more equities in the country. 

The International Monetary Fund said in a report on Tuesday it’s too soon to sound the all-clear from the turmoil that’s shaken the financial system, saying the banking breakdowns will likely be a drag on global economic growth. US banks on Friday will kick off what’s forecast to be the worst earnings season since the depths of the pandemic.

Elsewhere, Bitcoin dipped, after climbing above $30,000 on Tuesday for the first time in 10 months. Oil rose above $81 a barrel as the first of a spate of supply-and-demand projections scheduled this week forecast a modest rise in US production. Gold edged higher. BM/DM