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Grocery clerk James Delarosa takes inventory of the vinaigrette and condiment aisles at a Publix Super Markets Inc. grocery store in Knoxville, Tennessee.
Luke Sharrett | Bloomberg | Getty Images
Consumer price inflation is expected to have risen at a rate of 1.9% in May, slower than in April and below the 2% target set by the Federal Reserve .
Much focus is on the inflation report released Wednesday at 8:30 am EST, as the Fed said it could cut interest rates this year, if that goes justified, and that low inflation could spark speculation. . A higher reading of inflation would have the opposite effect and lessen expectations of rate cuts, which market players may expect in July and again later in the year.
Economists predict a 0.1% increase in the consumer price index, according to Dow Jones. This compares to a gain of 0.3% in April. Year on year, this would represent an increase of 1.9%, compared to 2% in April.
The core CPI, which excludes food and energy, is expected to rise 0.2%, an annual rate of 2.1%, according to the April base text. The Fed's preferred inflation measure is the personal consumption expenditure index, which was 1.5% in April.
"The CPI is a very big problem." One of the factors that holds the Fed's attention is the assumption that underlying inflation is close to 2%. "said Jon Hill, BMO rate strategist. "There have been transient impacts on PCE, which have dragged it down.If you see a major shortfall … in the CPI, you will hear stronger calls for cuts in next week."
The Fed will meet next week and again at the end of July. Hill said that in the futures market of federal funds, expectations are only 12% for a quarter-point rate cut in June, but that the market is forecasting a 82% reduction in chances of reduction of a quarter point in July.
"If they align, it will reduce the chances of a reduction in June, while retaining a reduction in July," Hill said.
Art Hogan, chief market strategist at National Alliance, said the market was more number-based than normal.
If the number is small, there could be a big reaction from the stock market.
"I think the market is in the counter-intuitive world of" bad news, good news. "It's a perverse place," said Hogan. "Like or not, it's where we're at. are. You have seen the reaction with the last number of jobs. The number of jobs missed per 100,000 and the market has increased. "
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