Fresh Inflation Data Is Expected to Show Continued Cooling

The Federal Reserve is watching inflation figures as it contemplates when to lower interest rates, and could receive positive news Thursday.

The Consumer Price Index likely climbed at a moderate pace in June, which would be welcome news for Federal Reserve officials who are watching for further evidence that they have wrestled rapid inflation under control.

Overall inflation was probably 3.1 percent in June on an annual basis, down from 3.3 percent in May and the coolest reading since January, based on Bloomberg economist forecasts. After stripping out food and fuel prices for a sense of the underlying trend, the “core” price index is expected to have climbed 3.4 percent compared to year earlier, unchanged from the previous report.

Inflation is expected to remain moderate on a monthly basis. Economists forecast just 0.2 percent core inflation on a monthly basis, which would match the reading for May.

Fed officials have been watching for evidence that inflation is still coming down as they contemplate when to begin cutting interest rates. The central bank has held borrowing costs at 5.3 percent for the past year, a relatively high setting that is meant to cool the economy by weighing down demand for big purchases that require loans, like houses and cars.

Policymakers came into 2024 expecting to cut them several times this year, but a spate of stubborn inflation numbers early in the year prevented that pivot. Policymakers now mostly expect to make one or two rate reductions before the end of the year.

But after the early-2024 blip, price pressures seem to be moderating again. And Thursday’s inflation reading is poised to be markedly cooler than the 9.1 percent rate when inflation peaked at in 2022.