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Federal Reserve officials may soon begin a more optimistic chapter in their policy deliberations with the first of what many analysts anticipate to be a string of data indicating renewed decreases in important price indexes, a year after U.S. inflation peaked and sparked an aggressive change in monetary policy.


The consumer price index data for June will be revealed on Wednesday morning. According to experts surveyed by Reuters, prices are expected to have increased by 3.1% from a year earlier, which would be a significant decrease from the annual inflation rate of 4% recorded in May and 9% in June 2022, which was the most in four decades.

A different measure of underlying inflation, which excludes commodities like energy and food that are linked to global commodity markets, is anticipated to experience a more gradual decline, dropping to 5% from a pace of 5.3% the previous month.

However, analysts and some Fed officials are growing increasingly confident that the much-anticipated gradual decline in what is known as “core” inflation may begin with Wednesday’s data on how prices behaved last month and last for the following few months.

Used car price declines, indications of waning service sector demand, anticipation of slower airfare increases, and other factors all contributed to a combined easing of U.S. price pressures, according to Omair Sharif of Inflation Insights. “The June data is likely the leading edge of a string of softer core inflation prints over the next several months,” he wrote.

The Federal Reserve will not be deterred from raising interest rates by a quarter point at its forthcoming meeting on July 25–26 by a month of positive inflation data.

A carefully watched version of the Personal Consumption Expenditures price index, which is also free of volatile food and energy costs, has been registered at approximately 4.6% since December, exceeding the central bank’s aim of 2% inflation.

Officials from the Fed have stated that they require consistent decreases in order to be confident that inflation is in check and headed in a sure direction toward target.


Recent data has been mixed, showing slowing overall job growth and still-strong wage increases that some officials fear will fuel future inflation as well as improved sentiment in recent small business surveys that show economic resilience but also a rise in the percentage of owners planning price increases.

But more importantly, inflation forecasts among the general public have held steady. The long-term inflation outlook is “anchored near the Federal Reserve’s 2% target,” according to a study published this week by the Cleveland Federal Reserve’s Center for Inflation Research. Fed policymakers generally agree with this conclusion since they view any increase in public inflation expectations as a risk that inflation itself may accelerate.

The calendar is also working in the Fed’s favor because recent, worse statistics on housing rentals are expected to become more prominent in the numbers, and some of the worst months for inflation are slated to be excluded from calculations of yearly price rises.

Global supply constraints keep becoming better, and latest online price data points to softening goods costs. A measure of online retail pricing published by software and analytics company Adobe (NASDAQ:ADBE) showed prices declined 2.6% in June, the most since May 2020, with an 8.3% decline in appliance costs and a 12.9% decline in electronics prices year over year as the primary contributors.

Fed policymakers have been wary to stake their future on positive news because they were surprised by the persistence of inflation when they initially believed it would go away on its own. They haven’t declared triumph over inflation, instead concentrating on the dangers that it might return, fretting over its obstinacy, and more often than not planning higher interest rates if there was any question.

But according to recent forecasts, 13 out of 18 officials thought the Fed was possibly just a quarter or a half of a percentage point away from stopping rate increases. The upcoming inflation statistics may help to confirm this.

Some believe that inflation has reached a point where an unwanted occurrence may have occurred.

Raphael Bostic, president of the Atlanta Federal Reserve, said in remarks this week that he believed the Fed “had momentum” in its fight against inflation and that it won’t need to raise rates again.

According to Bostic, “the underlying data is actually telling a very positive story,” and subsequent information might clarify that.