the SPDR S&P 500 ETF Trust SPY was trading 0.6% higher on Wednesday ahead of a critical Consumer Price Index (CPI) inflation read on Thursday morning.

Economists expect the US Labor Department to report 6.5% CPI inflation in December, down from 7.1% in November and peaking at 9.1% in June. Economists also project this core CPI inflation, which excludes volatile Energy and food prices increased by 5.7% in December compared to 6% in the previous month.

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The latest reading of inflation comes after the US Federal Reserve issued a 0.5% rate hike in December in its ongoing battle to bring down the highest US inflation in about 40 years. The Fed has had some success in cooling an overheated US economy, but the market is expecting more rate hikes early 2023.

Jobs and wages: Earlier this month, the Labor Department reported that the US economy added 223,000 jobs in December, beating economists’ estimate of 200,000 jobs. The Labor Department also reported that wages rose 4.6% year-on-year and 0.2% from November. US GDP grew 2.6% in the third quarter, beating the 2.3% growth expected by economists.

In addition to the CPI reading, investors will be watching Friday when the University of Michigan releases its preliminary US consumer sentiment index for January. Economists expect the index to rise to 60.5 in January from 59.7 in December.

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voices from the street: Nick Reece, VP of macro research & investment strategy at Merk Investments, said Wednesday that the December jobs report was mixed but relatively good ahead of the CPI reading.

“Notably, even amid solid job gains, wage inflation (which the Fed is very focused on) has declined – raising the prospect of a slowdown in inflation without the need for a Fed-induced recession,” Reece said.