Since the Federal Reserve paused its aggressive series of interest-rate hikes last month, a flurry of US employment data last week left investors uncertain about the direction of the central bank’s monetary policy.
However, this week’s June CPI report may provide investors with more clarity on whether the Fed will still need to step up its fight against inflation.
Determining The Stock Market’s Future
According to market analysts, the June consumer price index report, which will be announced on Wednesday at 8:30 am Eastern, could either give the green light for a continuation of the stock market rise or could put an end to the current baby bull market because macroeconomic headwinds are growing stronger and could potentially derail the rally.
According to a survey of economists by Dow Jones, the Bureau of Labor Statistics’ June CPI reading, which measures changes in the prices consumers pay for goods and services, is predicted to show a 3.1% increase from a year ago, slowing from the 4% increase seen in the previous month.
It is anticipated that the core price index, which excludes volatile expenses for food and fuel, will increase 5.0% from a year ago, down from 5.3% in May.
Read more: Inflation Eases Overall In May, But Core Prices Hold Strong
Interest Rate Raises To Tackle Inflation
Specifically in the so-called super-core inflation, which excludes energy, food, and housing prices and declines more slowly than the broader gauge, Tony Roth, chief investment officer at Wilmington Trust, said his team anticipates disinflation to continue in June.
Following the Fed’s decision to maintain its benchmark interest rates at 5% to 5.25% in June, the US stock market has experienced a swing from fears of a hard landing in the first half of 2023 to hopes of a soft landing in the second.
However, Fed Chair Jerome Powell issued a warning, noting that some policymakers still anticipate two additional quarter-point raises in interest rates in the second half of 2023. This year’s interest rate increases are intended to battle inflation.
Read more: Inflation Management: How Expanded Child Tax Credits Outshine A Higher Standard Deduction