NEW YORK, Feb 7 (Reuters) - A fresh look at the pace of

inflation will test the U.S. stock market in the coming week, as

investors worry that President Donald Trump's tariff plans are

endangering Wall Street's hopes for interest rate cuts this

year.

The benchmark S&P 500 remained about 1% below

record-high levels, even as stocks were whipsawed this week by

headlines over Trump's plans to impose tariffs on the largest

U.S. trading partners.

Tariffs are widely seen as inflationary, complicating the

picture for the Federal Reserve. The central bank paused its

rate-cutting cycle last month as it waits for data to give an

all-clear sign to keep easing monetary policy.

The monthly consumer price index due on Wednesday offers the

latest read on inflation trends, a key investor concern. A

survey of over 4,000 traders published this week showed

inflation and tariffs are the factors expected to have the

biggest sway on markets this year.

"Inflation really is the wildcard for 2025 in terms of how

it's going to impact the interest rate environment," said

Charlie Ripley, senior investment strategist for Allianz

Investment Management. "In the event that we have higher

inflation, it really reduces the opportunity for the Fed to

continue cutting rates, and obviously markets don't like that."

The January report is expected to show an 0.3% increase in

CPI on a monthly basis, according to a Reuters poll.

Several Wall Street analysts warned that January is

traditionally a more challenging period to forecast CPI due to

seasonal factors, increasing the potential for market volatility

when the data is released.

The pace of inflation has moderated from 40-year highs

reached in 2022, allowing the Fed to cut rates last year, but it

has not yet subsided to the central bank's 2% annual target.

"We certainly don't want to see (CPI) heating up again,"

said Art Hogan, chief market strategist at B. Riley Wealth.

"That would raise a concern that the Fed funds rate is going to

be where it is for longer than we anticipate now."

Markets are pricing in an over 80% chance that the Fed

continues to hold rates steady at its next meeting in March,

while roughly two cuts are expected by the end of the year,

according to LSEG data.

Expectations for the Fed to stay on hold in March solidified

after Friday's mixed U.S. employment report. Job growth slowed

more than expected in January, but an unemployment rate of 4%

supported evidence of a healthy labor market.

But some investors are pulling back on expectations for

further easing this year. Morgan Stanley economists this week

said they now only project one cut this year, in June, as

opposed to two before, saying in a note that, "the path for

monetary policy in 2025 remains highly uncertain."

The Morgan Stanley team pointed to tariff uncertainty raising

the hurdle for rate cuts. Investors this week grappled with an

evolving tariff backdrop, with Trump imposing and then delaying

for a month tariffs on imports from Canada and Mexico, while

putting in place a 10% duty on China.

Following initial news of the tariffs on Monday, the Cboe

Volatility Index spiked to a one-week high of 20.42 but

has since subsided to around 15.

"Early in the second Trump administration, tariff threats

have revived market volatility," Lawrence Gillum, chief fixed

income strategist at LPL Financial, said in a written commentary

on Thursday.

The Fed's rate view could become clearer when Chair Jerome

Powell testifies before Congress on Tuesday and Wednesday.

Corporate earnings reports will also be in focus in the

coming week, with results due from Coca-Cola, Cisco ( CSCO )

and McDonald's.

With over half of the S&P 500 reported, fourth-quarter

earnings were on track to have climbed 12.7% from a year

earlier, up from an estimate of 9.6% growth at the start of

January, according to LSEG IBES.

Earnings season overall has been a positive factor for

stocks despite uncertainty around tariffs, said Anthony

Saglimbene, chief market strategist at Ameriprise Financial.

"Commentary from a lot of different industries has been

solid," Saglimbene said. "Demand drivers remain intact."

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