Inflation is expected to cool further in June, but that won’t stop the Fed
On Wednesday, investors will be closely watching one of the key data points for the future of Federal Reserve policy – the June Inflation Report.
The closely watched Consumer Price Index (CPI), due to be released at 8:30 a.m. ET, is expected to show that consumer prices have cooled even further over the last month, with headline inflation expected to rise 3.1% yoy, which represents a sustained slowdown Bloomberg estimates annual growth in May was 4%.
A 3.1% increase would be the slowest annual rise in consumer prices since March 2021.
In the previous month, consumer prices are expected to have risen by 0.3% in June, compared to the monthly increase of 0.1% in May.
According to Bloomberg data, prices are expected to have risen 0.3% mom and 5% yoy in June on a “core basis”, meaning excluding the more volatile cost of food and gas.
Most of the slowdown will be related to a further cut in housing prices — which has long been expected — as well as a fall in used-car prices, according to a new note from Citi.
Still, inflation is expected to remain well above the Federal Reserve’s 2 percent target. This, coupled with last week’s jobs data showing a resilient job market with low unemployment and high wages, suggests the Federal Reserve will hike rates further this year.
Currently, markets are pricing in a roughly 92% chance that the Federal Reserve will hike rates by another 0.25% later this month, according to data from CME Group.
Comments are closed.