Markets wobble ahead of today’s pivotal inflation report. A doozy would force the Fed to raise interest rates even higher, investors fear

According to a Reuters poll of economists, the consensus estimate will show consumer prices rose a further 0.7% last month, which would mean inflation is running at a blistering rate of 8.3% higher than a year ago. As bad as that sounds, such a print would show a second straight month of moderating prices. Last month, the CPI report revealed inflation running at an 8.3% annual growth rate, a wee bit better than the 8.5% reading in April.

The big culprit around inflation is expected to be soaring gas and food prices. If you strip away those essentials, arriving at what’s called the core inflation reading, economists believe prices rose by a more modest 5.9%.

No matter how you look at it, this will be the last big piece of economic data to come in ahead of next week’s FOMC meeting. A hot reading will up the odds that the Federal Reserve goes even more hawkish, pulling out the bazooka to cool off the economy by raising borrowing costs.

A 50-basis-point increase by the Fed is already priced in for next Wednesday’s rates decision. The worry is that unless inflation begins to tick downwards soon, the Fed will have to tighten further at a faster pace than what the market’s been expecting.

As Deutsche Bank’s Jim Reid advised investors this morning, “it would now be a massive surprise at this point if the Fed did anything other than a second consecutive 50bps hike next week. So most of the action from this report will come in the form of September-onwards Fed pricing.”

But has inflation peaked?

Wall Street will be looking for signs that inflation has peaked, and so far that’s hardly assured.

Mohamed El-Erian, a chief economic adviser at Allianz, told Bloomberg Television on Thursday he has real fears investors will see more bad than good in today’s report.

“What worries me is that the June month-on-month print will be worse than the May month-on-month print. Those who boldly said inflation has peaked and is coming down may have to change their minds,” he said.

He’s not alone with those concerns, apparently. In afternoon trade on Thursday, investors dumped shares in a broad-based sell-off, sending all three major exchanges sharply lower on the day. U.S. Futures were in the red again on Friday, following European and Asian shares lower.

Bitcoin, another risk asset that’s proven to be highly sensitive to inflation, was flat at 4 a.m. ET., trading just above $30,000. The alt coin is down 3% over the past month, underperforming the S&P 500 and Nasdaq over that period.