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Skip NavigationMarketsBusinessInvestingTechPolitics & PolicyVideoWatchlistInvesting ClubPROLivestreamMenuBy this point it seems certain that Federal Reserve Chairman Kevin Warsh will be held to his word next week, likely delivering a hike at Wednesday’s policy meeting after the latest inflation data failed to soothe fears that pricing pressures will be coming down anytime soon. That may be exactly what the market wants. Stocks rallied Friday, and the yield curve flattened somewhat, immediately after the August reading of the consumer price index was released — signaling loudly to the Fed chief that a quarter-point raise next week is the right move. The 3.4% annual inflation rate was still well above the central bank’s target of 2%. After all, Warsh had been clear just a few short weeks ago at Jackson Hole, Wyoming, that he will be tough on inflation , after his vague messaging at the July meeting confused investors. “We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do. That’s our job, our mandate and our charge to keep,” Warsh said at the central bank’s annual symposium in late August. “He has set himself up in such a way where he loses credibility if he doesn’t hike in the face of concerning inflation data,” said John Belton, portfolio manager of Gabelli Growth Fund (GABGX) at Gabelli Funds. That credibility will continue to be in question, as the central bank will be as data dependent as it’s ever been on upcoming releases just as inflationary forces swell. Oil prices in the U.S . and globally have surged above $100 per barrel this week, as hostilities between the U.S. and Iran ramped up — cementing the likelihood of a prolonged war. Higher oil prices have also driven up yields, which has hurt stocks. On Friday, the 10-year Treasury yield was just on the threshold of 5%, before pulling back from those highs; it remains above 4.9%. By this point, it’s clear to investors that the trajectory for stocks depends on what happens next for inflation. For bulls, it’s clear that any signs of improvement in the upcoming inflation data, or any news of a resolution in the Middle East, could relieve the pressure on the stock market and allow equities to bounce back in a big way. But there’s also the possibility in which inflation remains stubbornly high, necessitating further hikes from the Federal Reserve that could make it challenging for stocks to continue their climb. The latest fed funds futures are showing a nearly 50% likelihood that rates will range from 4% to 4.25% at the December meeting, implying two quarter-point hikes between now and then, according to the CME FedWatch Tool . The current target rate is in a range of 3.5% to 3.75%. Gabelli’s Belton said he believes stocks could continue to work in that environment, especially artificial intelligence names where valuations are not yet especially demanding and fundamentals remain strong. But he said he could see a scenario in which the Fed decides on a series of hikes over the next six to nine months that could make the overnight lending rate “meaningfully higher.” In his view, what matters most over the next several meetings is a Fed determined to steer the ship against inflation if it continues to go higher, he said. “More important than a hike or hold, is the Fed establishing that credibility,” Belton said. Week ahead calendar All times ET. Monday, Sept. 14 Tuesday, Sept. 15 8:15 a.m. ADP Weekly Employment change (08/29) 8:30 a.m. Empire State Index (September) Wednesday, Sept. 16 8:30 a.m. Export Price Index (August) 8:30 a.m. Import Price Index (August) 8:30 a.m. Retail Sales (August) 10:00 a.m. Business Inventories (July) 10:00 a.m. NAHB Housing Market Index (September) 2:00 p.m. FOMC Meeting with Economic Projections 2:00 p.m. Fed Funds Target Upper Bound Earnings: Lennar Thursday, Sept. 17 8:30 a.m. Housing Starts (August) 8:30 a.m. Initial Claims (09/12) 8:30 a.m. Philadelphia Fed Index (September) 10:00 a.m. Pending Home Sales (August) Friday, Sept. 18 9:15 a.m. Capacity Utilization (August) 9:15 a.m. Industrial Production (August) 10:00 a.m. Leading Indicators (August)Read More