After an intense week of essential employment reports, inflation data comes back into focus this week with the imminent release of the U.S. June Consumer Price Index (CPI) and the Producer Price Index the day after. Investors will closely monitor these indicators, hoping for declines that might persuade the federal reserve to reconsider its plan to raise interest rates by 25 basis points. A return to monetary hawkishness could occur as a consequence of a pause in rate hikes last month – a first in over a year.
The Federal Reserve’s measures have reportedly brought the CPI down from 9% in August 2022 to 4% in May, which is a notable decrease. However, it’s also generated concerns about a possible excessive reaction which could potentially push the economy towards a profound recession.
Wednesday will have monetary policy observers anxiously awaiting the release of the June CPI by the Labor Department. This index has maintained a steady decline since its peak last year. Economic predictions expect the index to dip to around the mid 3% range for June. Edward Moya, senior market analyst at Oanda, suspects it might even fall as low as 2.8%. However, he also emphasized that core inflation may remain high due to the costly housing market, a crucial factor that cannot be overlooked.
As we look forward to Thursday, attention turns to the Producer Price Index (PPI), an invaluable indicator of price alterations at the wholesale level, often signifying future changes facing consumers. May’s PPI significantly dropped to 1.1% annually, outperforming the expected 1.5% decline and presenting a considerable decrease from April’s 2.3% reading. The consensus suggests a conservative 0.4% reading for June.
That same day, the U.S. Labor Department will release jobless claims data for the week ending July 8. Various recent jobs reports have presented slightly contrasting views on the job market’s current state. While the unexpectedly strong results of the recent ADP report offers backing for the Fed to reintroduce its aggressive inflation measures, some new data has added complexity to the overall picture. Last week’s strong employment figures implied economic expansion, often a precursor to heightened prices. But not all indicators were as promising – an unusual yet minor uptick in jobless claims, coupled with a non-normative nonfarm jobs report later in the week, add layers to the situation’s intricacy.
Source: Coindesk
