An early interest rate hike by the Fed and an even bigger rise in US inflation are expected. The stock market is showing an extremely cautious rise on Monday.

Consumer spending and its growth have been severely limited by the worldwide spread of the Omicron strain. The Fed has not ruled out an end to the liquidity injection. The markets are clearly less optimistic, with the S&P 500 adding just 0.1% and the NASDAQ rose by 0.2%. EURO STOXX 50 and FTSE futures also barely rose. The upward movement on the chart during the morning hours was only 0.2%. MSCI Asia ex Japan gained just 0.3% and the South Korea's indices fell by 1%.

US consumer price data is expected to be released on Wednesday. Analysts believe that core inflation in the United States has already reached 5.4%, the highest level in decades. If analysts' expectations come true, an interest rate hike in the US will take place not in June, as previously expected, but as early as March.

The release of US labour market data for December was another indication of an early rate hike. Thus, the number of jobs last month fell short of forecasts. Wages in the country have risen and the unemployment rate has fallen to 3.9%. This data is quite consistent with the rhetoric of Fed officials, who already acknowledge that the US labour market is finally approaching maximum employment. According to analysts at NatWest Markets, employment in the US has risen to its highest level. At the same time, wage pressures have increased.

Fed officials are due to give their views on inflation and the labour market this week. Jerome Powell and Governor Lael Brainard are among those expected to speak. They will face a confirmation hearing.

In anticipation of comments from Fed officials, it has become clear that investors are much more willing to invest in various banks and energy companies than in technology stocks.

As for the 10-year US Treasury yield, it rose by 25 basis points last week. This is almost at its highest level in the past year. This movement, by the way, was the most tangible since the end of 2019. The next target on the chart is predicted by analysts to be in the 1.95-1.97% range. According to economist Nicholas Farr at Capital Economics, markets are still underestimating how much the federal funds rate will rise in the next few years. Therefore, long-term Treasury yields will rise by 50 basis points to 2.25% by the end of 2023.