The US inflation data was higher than expected, boosting market expectations for more interest rate hikes by the Federal Reserve, and the European stock market rebounded some of its gains. At 1:49 p.m. London time, the European Stoxx 600 index rose 0.4%, the biggest intraday increase of 0.7%. The data shows that due to rising fuel costs, US consumer prices recorded the biggest increase in five months, and the core inflation index was also higher than expected. Swap traders currently believe that the probability that the Federal Reserve will raise interest rates later this month is close to May 5; the probability is only 22% for market pricing on Tuesday. Schroder senior economist George Brown said, “Today's report shows that the inflation problem is far more stubborn than expected. The market's judgment is correct. If inflation is to be brought back to the target range, the policy needs to be further tightened. The question is whether the Federal Reserve is willing to implement austerity to the extent required by the inflationary situation.”

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