Published 12:16 IST, July 11th 2024
US Inflation expected to decline, strengthening case for Fed rate cuts
The Bureau of Labor Statistics will release the latest figures on Thursday.

US inflation: Economists anticipate a further decline in US inflation this week, potentially supporting multiple interest rate cuts by the Federal Reserve this year. According to a Reuters poll, annual consumer price inflation is forecasted to drop to 3.1 per cent in June, down from 3.3 per cent in May. The Bureau of Labor Statistics will release the latest figures on Thursday.
June Inflation Forecast
Economists forecast a decline in the annual consumer price inflation rate to 3.1 per cent in June, a decrease from 3.3 per cent in May. This expected drop is based on a Reuters poll and signals a potential easing of inflationary pressures. The Bureau of Labor Statistics is set to publish the latest inflation figures on Thursday, which will be closely monitored by the markets and the Federal Reserve.
Impact on Federal Reserve Policy
The anticipated decrease in inflation, along with data showing a slowdown in the US hiring pace, could influence the Federal Reserve's decision on interest rates. Currently, the markets expect two rate cuts this year, possibly starting in September or November. However, during their June meeting, Fed officials suggested they might only cut interest rates once this year. The evolving inflation data will be critical in shaping the Fed's approach to monetary policy.
Barclays Economists' Insights
Barclays economists, led by Pooja Sriram, believe the expected June inflation figures will boost the Fed's confidence in the ongoing disinflation process. They highlighted that the tone of Friday’s jobs data would be essential in the Fed’s assessment of whether the conditions are falling into place to support a sustained return to the 2 per cent target. This suggests that the labour market data, in conjunction with inflation readings, will play a significant role in the Fed's decision-making process.
Core Inflation Remains Steady
Despite the forecasted overall inflation decline, core inflation, which excludes volatile food and energy prices, is expected to remain unchanged. In May, core inflation fell to a three-year low of 3.4 per cent, partly due to a change in methodology. However, economists do not anticipate further progress in the upcoming data. Core inflation is a critical measure closely watched by rate-setters, and its stability could influence the Fed's confidence in achieving its long-term inflation targets.
The upcoming inflation data release will be key in determining the Federal Reserve's next steps regarding interest rate adjustments. A decline in inflation, coupled with labour market dynamics, could prompt the Fed to implement rate cuts sooner than anticipated, impacting economic conditions and market expectations.
Updated 12:16 IST, July 11th 2024