Wall Street braced for another inflation checkup after Tuesday's consumer price reading spurred traders to pare bets on Fed rate cuts in the coming months.

"If the recent tariffs announced/threatened go into effect, it will take a few months for that additional boost to inflation to be felt in goods prices and will keep the Fed on the sideline unless the labor market takes a sudden turn for the worse," Ryan Sweet, chief US economist at Oxford Economics, wrote in a note on Tuesday.

The Indian rupee fell on Wednesday as the latest U.S. inflation report showed that tariffs were beginning to feed into prices, weakening bets on rate cuts by the Federal Reserve, which lifted U.S. Treasury yields and the dollar.

June's Consumer Price Index (CPI) report likely gives the Federal Reserve room to continue its wait-and-see approach to cutting rates amid uncertainty over how President Trump's tariffs will impact inflation.

A busy week ahead for investors will see inflation data, the debate about the Fed's next move, and the start of second quarter earnings season all come into focus after a flurry of trade activity last week.

Federal Reserve Bank of Cleveland President Beth Hammack said on Monday she sees no imminent need to lower interest rates right now given that inflation is still too high, amid ongoing uncertainty about how trade tariffs will affect price pressures.

The emerging divide among Federal Reserve officials over the outlook for interest rates is being driven largely by differing expectations for how tariffs might affect inflation, a record of policymakers’ most recent meeting showed.

Companies seeking to attract as many workers as they can — and reduce their own wage costs — like to locate in places that are affordable.