On Thursday, investors will get a sense of one of the most important data points that will shape the Federal Reserve’s future interest rate policy. Consumer Price Index (CPI) for June.
The inflation report, scheduled for release at 8:30 a.m. ET, is expected to show headline inflation at 3.1%. Slowing from May’s 3.3% increaseFurther declines in energy prices are likely to have contributed to further downward pressure on headline CPI, which will mark its smallest annual increase since January.
Month-on-month, consumer prices are expected to rise 0.1%, up slightly from the flat reading in May.
Meanwhile, on a “core” basis – which excludes volatile costs such as food and gasoline – prices are expected to have risen 3.4% in June from a year earlier and 0.2% from the previous month, unchanged from May, according to Bloomberg data.
“Following an undoubtedly strong May CPI report, we expect the June CPI report to again strengthen confidence,” Bank of America economists Stephen Juneau and Michael Gapen wrote in a note last week.
The expected figure “would not be as low as May’s, but would still be good for the Fed,” the economists said.
Thursday’s inflation data comes at a key time for central banks. Slowing job market growthCoupled with recent testimony from Federal Reserve Chairman Jay Powell, expectations of a rate cut persist.
Powell, who finishes his semi-annual policy update to Congress on Wednesday, has largely stuck to his data-dependent view, a positive sign given the recent strong data. On Tuesday, he told the Senate Banking Committee that while there is evidence inflation is moderating, the Fed still needs to reassess monetary policy. More “good data” To be confident that inflation is moving towards the 2% target.
Core inflation has remained stubbornly high due to rising costs of core services like housing, insurance and health care. Non-residential services “surprisingly fell slightly in May, mainly due to a slight decline in auto insurance,” Bank of America’s Juneau and Gapen wrote.
However, economists expect the services sector (and auto insurance) to grow in June. “Bumpy” The future path towards price stabilization.
“Given slowing wage inflation in the services sector, inflation in the non-residential services sector should ease over time, but prolonged deflation is unlikely,” they warned.
