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June CPI Inflation Report Preview
As I await the crucial Consumer Price Index (CPI) report for June, set to be released on Thursday, I am keenly aware of the significant implications it holds for the economy. Economists surveyed by Dow Jones predict a 0.1% increase in CPI compared to May and a 3.1% rise from a year earlier. This data could reinforce the likelihood of interest rate cuts by the Federal Reserve in the upcoming months.
Federal Reserve Chair Jerome Powell's recent testimony on Capitol Hill hinted at a more balanced view of economic risks between inflation and recession, possibly paving the way for rate reductions. The CPI report is expected to provide valuable insights into key sectors such as shelter and medical care services. Recent economic indicators suggest a cooling trend in inflation and economic growth, with unemployment rising to 4.1% in June.
Analysts are eyeing a 0.1% monthly increase and a 3.1% yearly rise in CPI, while the core CPI, excluding volatile food and energy prices, is predicted to climb by 0.2% from May and 3.4% from June last year. In May, CPI remained unchanged on a monthly basis but rose by 3.3% annually. Matt Brenner from MissionSquare Retirement emphasizes the importance of monitoring unemployment and inflation trends, suggesting a shift towards rate cuts as indicators point to a gradual rise in unemployment and a downward trajectory in inflation.
Market expectations, as reflected in Fed funds futures pricing, indicate a hold on rates in July followed by a potential cut in September. The reaction to Thursday's CPI report may be tempered by the anticipated rate hold in July, according to Bank of America. However, Tony Roth, Chief Investment Officer at Wilmington Trust, suggests that a lower-than-expected inflation reading could boost stock markets, hinting at lingering concerns among investors from earlier inflation spikes this year.
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