:max_bytes(150000):strip_icc()/GettyImages-2161700329-2944c96f6a2f411e8679a93ef30f72db.jpg "What to Expect From This Week’s Consumer Price Inflation Report")
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Key Takeaways
- Economists expect the July Consumer Price Index will show that annual inflation held steady at 3.0%, while closely watched ‘core inflation’ likely cooled slightly to a rate of 3.2%.
- Easing costs for cars, airfare and housing are helping slow inflation, but auto insurance is expected to continue to move higher.
- Federal Reserve officials have said they need to see continued signs that inflation is under control before moving to cut interest rates at their September policy meeting.
Economists are wondering if a moderate inflation decline in July will be enough to convince skeptical Federal Reserve officials to begin lowering interest rates.
The Consumer Price Index (CPI), due to be released Wednesday, is expected to show prices increased at annual rate of 3.0%, the same as it was in June, according to economists surveyed by The Wall Street Journal and Dow Jones Newswires. For the closely-watched “core” CPI inflation, which strips out volatile food and energy costs, economists expect an annual rate of 3.2%, just a tick down from 3.3% in June.
All told, inflation is still roughly in the same spot it was in June 2023, and stubbornly above the Federal Reserve’s target of 2%.
“The July CPI report is likely to further the case that inflation is quieting down even if it has not yet returned to the Fed’s target,” Wells Fargo economists said.
Some Officials Still Not Convinced on Inflation
Federal Reserve officials will be closely looking at the inflation data, and at least one central banker said this weekend she still isn’t confident that inflation is moving lower.
“I continue to view inflation as somewhat elevated. And with some upside risks to inflation, I still see the need to pay close attention to the price-stability side of our mandate while watching for risks of a material weakening in the labor market,” Federal Reserve Gov. Michelle Bowman told the Kansas Bankers Association on Saturday.
Bowman’s comments showed that an interest rate cut from the Federal Reserve’s Open Market Committee (FOMC), which next meets in mid-September, is still not a sure thing, even amid signs that the labor market is weakening. (The Fed has a dual mandate to promote price stability and maintain maximum employment.)
“So one of the most hawkish FOMC voices sounding not yet convinced on the immediacy of rate cuts,” Deutsche Bank Research wrote of Bowman’s comments. “The upcoming inflation data will be important for whether the Fed gains confidence to signal more clearly a cut at the September meeting.”
After the Fed opted two weeks ago to leave the influential fed funds rate unchanged at its current 23-year high, Chair Jerome Powell said there was a possibility of a September rate cut, but he reiterated that there would be a need for more data showing that the economy was moving in the right direction.
“It will likely take similar well-behaved inflation data in August (or a higher jobless rate) to assure a majority of voting members on the FOMC that inflation is moving convincingly to the 2.0% target,” wrote Priscilla Thiagamoorthy, senior economist at BMO Capital Markets.