• Consumer Price Index in the US is forecast to rise 3.1% in June, down sharply from the 4% increase recorded in May.
• Core CPI inflation is foreseen at 5% YoY in June, compared to 5.3%in May.
• US CPI inflation report is set to influence the Fed’s rate outlook and the US Dollar’s valuation.

The highly-anticipated Consumer Price Index (CPI) inflation data for June will be published by the US Bureau of Labor Statistics (BLS) on July 12 at 12:30 GMT. 

The United States Dollar (USD) has been struggling to find demand in the lead-up to the crucial US inflation report, following a mixed June jobs report. Although the Federal Reserve (Fed) is widely anticipated to raise its policy rate by 25 basis points in July, markets are not yet convinced that the US central bank will opt for additional rate hikes later this year.

The US CPI inflation data could influence the Fed’s rate outlook and trigger a significant reaction in the USD. Investors will scrutinize the underlying details of the report to figure out whether sticky parts of core inflation show signs of softening.

What to expect in the next CPI data report?

The US Consumer Price Index data, on a yearly basis, is expected rise 3.1% in June, a noticeable deceleration when compared with the 4% increase recorded in May. Similarly, the Core CPI figure, which excludes volatile food and energy prices, is expected to advance 5%, a much more moderate pace than May’s 5.3% growth.

The monthly Consumer Price Index is forecast to rise 0.3% in June, having inched 0.1% higher previously. The Core CPI is anticipated to increase 0.3% in the same period. Since annual CPI readings are subject to base effects, markets are likely to react to changes in monthly figures.

The Federal Reserve Bank of New York's monthly Survey of Consumer Expectations showed on Monday that the US consumers' one-year inflation expectation dropped to the lowest level since April 2021 at 3.8% in June from 4.1% in May. This headline caused the USD to come under renewed selling pressure at the beginning of the week. Meanwhile, Fed policymakers have acknowledged progress in inflation in their recent comments, while reiterating the need for additional policy tightening.  

"We are quite attentive to bringing inflation down to target," Federal Reserve Vice Chair for Supervision Michael Barr said on Monday and added that they still have “a bit of work to do.” Similarly, Cleveland Fed President Loretta Mester noted that they will need to tighten the policy “somewhat further” to lower inflation. 

Analysts at TD Securities provide a brief preview of the key macro data and explain: “Our estimates for the CPI report suggest core price inflation likely lost meaningful momentum in June: We expect it to print 0.2% m/m — the slowest monthly pace for the core since 2021. We also look for a similar 0.2% gain for the headline. Importantly, we expect the report to show that core goods prices shifted to deflation, while shelter-price gains likely slowed down again. Note that our unrounded core CPI inflation forecast is 0.23%, so we judge the risk of a 0.3% m/m advance to be larger than that of 0.1%.”