US CPI: Anticipation Grows for June Inflation Data as Fed Considers First Rate Cut

In May, the US CPI monthly index held steady, while the annual index saw a 3.3 percent rise, a slight decrease from April's 3.4 percent increase. The core inflation index showed a 3.4 percent increase over the past year, with a 0.2 percent rise in May. This data offers some relief to the US Fed and global investors.

Attention now shifts to the June US CPI data, set for release by the Bureau of Labor Statistics on July 11, 2024, at 8:30 A.M. Eastern Time. The US Fed's upcoming FOMC meeting on July 30-31 is expected to keep policy rates unchanged. However, Fed Chair Jerome Powell's news conference may provide further insights into the Fed’s future plans.

In his recent testimony to Congress, Powell indicated that prolonged restrictive policies could slow economic growth and emphasized the need for more data to confirm inflation is steadily approaching the target.

Powell noted the US economy is no longer overheated, with a cooling job market bolstering the case for interest rate cuts. However, he avoided giving a specific timeline for the first rate cut, focusing instead on the Fed’s ongoing assessment of economic data and potential responses. Markets expect Powell to announce the first rate cut in September.

Despite the decline in inflation from 9.1% in June 2022 to 3.3% in May 2024, the Fed remains wary of inflation persistence, with a rate cut anticipated only after CPI reaches 2%. Any unexpected surge in inflation or drop in unemployment could unsettle markets and increase volatility.

The economy shows recovery signs, with earnings forecasts meeting or exceeding expectations for April-June. The S&P 500, Dow Jones Industrial Average, and Nasdaq Composite all saw gains in the first half of the year.

Key factors that will shape US markets through 2024 include the upcoming US elections in November, US CPI data, and the labor market.

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