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Is inflation really peaking? Are consumers growing more confident? We’ll get those answers this week when the latest consumer and producer price indexes as well as retail sales figures for August all come out.

The numbers could change the calculus for the Federal Reserve, which is guaranteed to raise interest rates again at its next policy meeting on September 21. The question is, by how much?

Traders are still predicting another three-quarters of a percentage point, or 75 basis point, hike, the third straight move of that size. And Fed chair Jerome Powell said last week that “the Fed has, and accepts, responsibility for price stability. We need to act right now.”

But could the odds of another huge rate hike edge lower if inflation data continues to suggest that “price stability” might finally be closer to reality? The consumer price index (CPI) numbers come out Tuesday morning while producer price index (PPI) figures will be released Wednesday.

Keep in mind that at the end of July, the market was pricing in just a 28% probability of a 75 basis point hike in September. Investors now think there’s an 88% chance of another super-sized hike, according to fed funds futures trading on the CME.

Economists are currently forecasting that consumer prices for August will fall slightly from July and that prices were up 8.1% over the past 12 months. Of course, 8.1% is still incredibly high by historical standards but it would be a notable slowdown from the June’s 9.1% year-over-year spike in prices.

“We probably have seen the peak on inflation. Food and energy prices are coming down. There is more room to the downside,” said Joe Kalish, chief global macro strategist with Ned Davis Research.

Investors seem to begrudgingly accept the likelihood that the Fed will raise rates by 75 basis points again in a few weeks…regardless of what the August inflation data indicates.

But traders are hoping that the September rate hike is the last one of such magnitude. Assuming the Fed boosts rates by three-quarters of a point on September 21, that would bring interest rates to a target range of 3% to 3.25%.

Look at fed funds futures on the CME for November. As of midday Friday, investors were pricing in 70% odds of a half-point hike at the Fed’s November 2 meeting … to a range of 3.5% to 3.75%.

There was just a 10% probability of a fourth straight 75 basis point increase, however, which could be one reason why stocks have rebounded so far in September following their August tumble.

Price increases slowing and consumers still spending

Wall Street is clearly betting that inflation trends will continue to head in the right direction. Economists also expect producer prices, the cost of goods at the wholesale level, to fall slightly in August. Forecasts are for a drop of 0.1% from July to August, following a 0.5% decrease from June to July.

Producer prices surged 9.8% year-over-year in July but that’s down from June’s high water mark of 11.3%. Any further slowdown would likely be welcomed by the market, the Fed and consumers.

That brings us to retail sales. Consumer spending figures for August are due out Thursday morning. The government reported last month that retail sales were up 10.3% year-over-year in July. It will be interesting to see if that rate of sales picked up in August or slowed down.

The Fed is in a tough spot. It wants to put inflation pressures to rest and the way to do that is with big interest rate hikes. But the Fed would also like to avoid a recession if it can, which is why some are still hoping for a soft, or a “softish,” landing for the economy, as Powell said in May.

Powell also talked about rate hikes and inflation causing “some pain” for the economy at his Jackson Hole speech last month. That could be an argument for the Fed to do smaller rate hikes…as long as inflation continues to cool.

And that is the key point. Investors have to pay closer attention to the inflation data than whatever Powell or other Fed members are saying. The Fed remains data dependent, which is why rate hike odds are constantly in flux.

“There must be a convincing downward trend in inflation. We are not there yet,” said David Donabedian, chief investment officer of CIBC Private Wealth US, in a report Friday.

Big techs on tap

The economy isn’t the only thing in focus next week. Two software giants, Oracle (ORCL) and Adobe (ADBE), will report their latest earnings. Investors will be watching for clues about the state of tech spending among big businesses.

Shares of both companies have fallen this year, along with rest of the tech sector and broader market. Oracle is down nearly 15% while Adobe has plunged more than 30%.

But analysts expect solid sales growth from both companies … nearly 15% for Adobe from a year ago and an almost 20% increase from Oracle.

One investment strategist said that big tech firms like Oracle and Adobe make sense for investors.

“We do own big techs that are much more mature and established,” said Suzanne Hutchins, head of the real returns strategy and senior portfolio manager with Newton Investment Management.

The results from Oracle and Adobe will also serve as a preview for the deluge of tech third quarter earnings that will come later in October. Solid results from these two could be a good sign for Microsoft (MSFT), SAP (SAP), IBM (IBM) and other cloud software firms.

Still, the recent earnings from Salesforce (CRM), which was cautious about its guidance, could be a warning sign for both companies, according to Daniel Morgan, senior portfolio manager with Synovus Trust Company. Oracle and Adobe also could get hit by the surging dollar, since that will eat into profits from their international operations.

“Both companies generate more than 40% of sales outside the US,” Morgan noted in a report.

Up next

Monday: China markets closed; earnings from Oracle

Tuesday: US CPI; Starbucks (SBUX) investor day; Twitter (TWTR) shareholder meeting to vote on Elon Musk acquisition

Wednesday: US PPI

Thursday: US retail sales; US weekly jobless claims; meeting between Russia’s Vladimir Putin and China’s Xi Jinping; earnings from Adobe

Friday: US U. of Michigan consumer sentiment; China retail sales, unemployment and other economic data