Investors are eagerly awaiting the release of June’s Consumer Price Index (CPI) on Thursday, as it will provide crucial insights into future Federal Reserve interest rate policy. The inflation report is expected to show a slight deceleration in headline inflation to 3.1%, down from 3.3% in May, marking the smallest annual rise since January.
Energy prices are likely to have contributed to the downward pressure on headline CPI, with consumer prices expected to have risen 0.1% over the prior month. On a “core” basis, which excludes food and gas prices, June’s prices are expected to have risen 3.4% over last year and 0.2% over the prior month.
Bank of America economists Stephen Juneau and Michael Gapen anticipate the June CPI report to be a positive sign for the Fed, following a strong May report. The data comes at a critical moment for the central bank, as slowing job market growth and recent testimony from Federal Reserve Chair Jay Powell have kept rate cut hopes alive.
Powell, who will conclude his semiannual policy update to Congress on Wednesday, has emphasized the importance of data in decision-making. While there has been evidence of cooler inflation, the Fed still requires more “good data” to be confident in inflation moving towards its 2% target.
Core inflation remains elevated due to higher costs of shelter and core services like insurance and medical care. Non-housing services saw a slight decline in May, but Juneau and Gapen expect an increase in June, highlighting the uncertain path ahead for price stabilization.
As investors brace for Thursday’s CPI release, all eyes will be on the numbers to gauge the Fed’s next move in response to the evolving economic landscape.
