‘Pivotal’ U.S. CPI Report To Show Lowest Core Inflation Since 2021

(Bloomberg) -- A trend of slowing headline and core inflation rates in the latest US consumer price index figures due Wednesday could be pivotal for policymakers in the months ahead, according to Bloomberg Economics.

“Optics and narratives matter, and the weak CPI readings we anticipate for June could prove pivotal in shaping inflation expectations in coming months,” Bloomberg economists Anna Wong and Jonathan Church wrote Tuesday in a preview of the numbers.

“Even the monthly pace of core CPI – free of base effects – will be the slowest since 2021,” they said.

Read More: US PREVIEW: Headline CPI to Fall to 3%, Core Lowest Since 2021

For the Federal Reserve, “soft inflation data could sow doubt about the need to hike again” following a widely-expected interest-rate increase at its upcoming July 25-26 policy meeting, Wong and Church said. “Bloomberg Economics expects the Fed to go on an extended pause” starting next month, they added.

Here’s what Bloomberg Economics is expecting:

• Both the headline and core (excluding food and energy) indexes are set to post a 0.2% advance in June, marking the smallest rise in core prices since 2021. Year-over-year, headline inflation is set to moderate to 3%, and core inflation to 4.9%
• Prices of used cars and trucks are set to drop 1.4%, helping to bring overall core goods prices down by 0.2% — marking a reversal from the increases of the past three months
• Owners’ equivalent rent is set to advance 0.5%, while the monthly increase in primary rent will moderate to 0.4%

The Bloomberg Economics estimates for Wednesday’s report are mostly below median projections in a Bloomberg survey of outside forecasters.

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