The stage is set

Last week was full of ups and downs. Markets opened on nervous footing after tensions flared up in the Middle East, but sentiment improved as hopes for de-escalation resurfaced. That shift helped stocks rebound and pushed oil prices to their lowest level in nearly three months.

Inflation, meanwhile, continues to be a thorn in the Federal Reserve’s side. Higher energy costs helped push the May Consumer Price Index higher by 4.2% year-over-year (y/y), representing a three-year high for the reading. Pricing pressure was even more pronounced at the wholesale level as evidenced by a 6.5% y/y rise in the Producer Price Index.

Still stubbornly above target, inflation is likely to be the focus for investors this week when Kevin Warsh takes the podium for the first time as Fed chair. While a rate move is not expected, markets will be watching for the slightest clues in the language and tone. Outside of the US, the European Central Bank raised its benchmark rate by 25 basis points last week, becoming the first major central bank to hike rates after the most recent bout of global inflation began.