CPI report expected to show inflation falling closer to 3%

Inflation and the timing of the Federal Reserve’s first cut could be key stories to the market on Thursday, with the June consumer price index report due out before the bell. Economists surveyed by Dow Jones are looking for the CPI to be up 0.1% month over month, and 3.1% year over year.

That would still be above the Fed’s 2% inflation target, but would be a slowdown from May. Federal Reserve Chair Jerome Powell said Wednesday on Capitol Hill that the Fed doesn’t need to wait until inflation gets all the way to 2% to cut rates, especially with signs that the labor market has cooled off.

“For some time the Fed has been more focused on levels, and now it seems that they may be starting to tilt more towards a focus on trend. And if that’s the case, then the chances of a rate cut go up,” said Matt Brenner, managing vice president, investments and product management at MissionSquare Retirement.