July CPI Forecasts Predict Continued Slowing Inflation

what is cpi expected to be

For example, the CPI only measures inflation for U.S. urban populations, thus leaving out the inflation experience of people living in rural areas. It also doesn’t include estimates of how different subgroups are experiencing inflation, such as the elderly or those living in poverty. By creating blanket assumptions of how people across varying demographics are experiencing inflation, monetary policy can’t fully capture or reach the needs of these different subgroups. Caldwell also expects July’s inflation to be similar to June on a month-by-month basis.

  1. Markets desperately want the Fed to stop raising interest rates – and especially look forward to a time when the central bank pivots to rate cuts – but that won’t happen until after inflation is under control.
  2. Inflation has started to meaningfully slow, even with the economy still creating plenty of new jobs for Americans.
  3. With offices in Cleveland, Cincinnati, and Pittsburgh, we serve an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia.
  4. That’s not so terrible but it also wouldn’t give the Fed cause to let down its guard.

“Right now, we are crossing the monetary policy bridge,” Torres says—the time between when interest rates peak and when the Fed starts cutting. “The hope is that there aren’t any job losses along the way.” Strong jobs data released Friday seemed to reinforce that hope for now. The U.S. Bureau of Labor Statistics (BLS) releases a monthly CPI report that includes statistics about how the prices of different goods and services change over the last month and the last 12-month period. Generally, they prefer the PCE inflation metric, which is released later on August 31. As such, markets often react to the CPI’s early inflation assessment. Additionally, the release of wholesale inflation data (PPI) on August 11 will be informative.

What Is the Latest CPI Inflation Reading?

“The underlying rate of inflation is coming down such that inflation will stay down for good,” says Preston Caldwell, chief U.S. economist at Morningstar. If another Federal Reserve decision on interest rates is the main course on this week’s menu of economic news, Tuesday’s inflation report will almost certainly set the table. Specifically, the Fed worries that inflation may get stuck at a level above 2% and that further progress on disinflation could be slow.

what is cpi expected to be

The models use currently observable market price trends to estimate what upcoming inflation reports will be. The November CPI report is expected to show that consumer prices were roughly flat on a monthly basis for a second straight month, lowering the annual gain to 3.1%, according to Barclays and Nomura. The drop likely was driven by another decline in gasoline prices and a modest uptick in food costs, the two research firms say.

Did inflation drift lower in November? CPI report could affect outlook for interest rates

The next PCE update will come on March 29, after the Fed’s upcoming meeting. Torres points to shelter prices continuing to slow as evidence that future deceleration is likely in services inflation. He also expects softer numbers in the transportation and restaurant categories. It’s important to note that there is also seasonally adjusted data included in the CPI. Though this data isn’t what’s focused on in news reports, it exposes underlying trends in short-term price changes.

what is cpi expected to be

He has published two books and is a CFA Charterholder and educated at Oxford and Northwestern. The Fed is generally pleased that inflation has declined overall, and has signaled that interest rate cuts are likely coming. This reflects the broad picture that inflation is now much lower than in 2022 and less of a major economic concern. In financial markets, investors have quickly pivoted from speculation about when the Fed’s rate hikes will end to wondering when the first rate cut will come. Trends will also be noted in the CPI report about how the most recent findings compare over time, for both individual indexes and the overall inflation rate. The $100 you just spent at the grocery store bought 4% less than it did one year ago.

What items are decreasing in price?

Headline inflation rose at a 3% annual rate and the monthly increase in core CPI was 0.2%. For July, the headline CPI is forecast to rise 0.2% from month-ago levels, while core CPI (which excludes volatile food and energy costs) is also expected to rise 0.2%. The June CPI report showed the overall CPI rising by 0.2% as well, which was an uptick from May’s 0.1% rise. However, core CPI stripping out food and energy prices is predicted to be less encouraging, growing 0.3% month-on-month and 4% annually. After peaking sharply in mid-2022, the annual rate of inflation fell abruptly to summer 2023. However, since then, the decline in inflation has generally been more gradual and less pronounced.

The BLS is committed to providing data promptly and according to established schedules. Automated retrieval programs (commonly called “robots” or “bots”) can cause delays and interfere with other customers’ timely access to information. Therefore, bot activity that doesn’t conform to BLS usage policy is prohibited. Download our spreadsheet to see all the inflation expectations model’s outputs going back to 1982. Nomura, meanwhile, reckons that both used car prices and airfares moved higher last month after falling previously.

In addition, compared to low monthly increases in the CPI series in late 2023, monthly inflation may be picking up in early 2024. The result is that inflation is hovering closer to or above 3%, depending on the series used, when the Fed’s goal is 2% annual inflation. Last month, CPI data revealed that annual inflation eased substantially in October from 3.7% to 3.2%. A core measure that strips out volatile food and energy items also dipped to 4% from 4.1%. Currently, headline CPI is estimated to rise 0.43% for February and 0.32% once food and energy are stripped out — a measure termed Core CPI. For the month of March, which will be reported in April, the Cleveland Fed’s model currently estimates that monthly headline and Core CPI will trend lower to 0.25% and 0.3%, respectively.

Core inflation, which refers to inflation minus food and energy prices, comes next. The most recent CPI data was released on February 13, 2024, covering the month of January. The January CPI annual inflation figure was 3.1% before seasonal adjustment. This means the cost of a basket of goods and services in the U.S. increased by an average of 3.1% from January 2023 to January 2024. This was lower than December’s figure before adjustment, which came in at 3.4%. This key economic metric is based on prices that consumers pay for goods and services throughout the U.S. economy.

We’d like to share more about how we work and what drives our day-to-day business. The author or authors do not own shares in any securities mentioned in this article. Patterson will be looking for signs that services and healthcare inflation are continuing on a downward path.

“A few deflationary contributors from a month ago won’t repeat this time, such as airlines and lodging, but we’re likely to see a large deflationary impulse from used cars,” he says. “In the July CPI report, the headline number won’t be as informative as the details,” says Clemons. “The one detail that really warrants attention is the cost of shelter. It makes up 28% of the overall picture, and it’s been stubbornly persistent.” He says the cost of shelter is starting to fall, and that he’s looking for the number to fall further in July. But the core reading, which the Fed closely monitors, is projected to rise 0.3% from October, up from a 0.2% increase the prior month, and remain at 4% on a yearly basis, the economists say.

The goal of our work is to strengthen the economic performance of the nation and our region. While the CPI may seem like complicated economic data, it impacts consumers in a variety of ways, from capturing their purchasing power to determining eligibility and payment amounts of government programs. This was the same as the December core CPI reading, which was 3.9% before seasonal adjustment as well. This is still well off the 40-year high from September 2022, which came in at 6.6% for the 12 months ending in September 2022. Inflation hit a four-decade high in 2022, prompting the Federal Reserve to embark on its most aggressive campaign of interest rate hikes since the late Carter and early Reagan administrations. “When is the next CPI report?” was a question no one was asking back in the days of 2% inflation readings.


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