June’s Inflation Report to Influence Upcoming Fed Rate Decisions

As the release date for June’s Consumer Price Index (CPI) data approaches, anticipation grows regarding the potential impact on monetary policy and the broader economic outlook. Here’s a detailed look at what to expect from the upcoming inflation report and how it might influence future Federal Reserve actions.

Current Inflation Trends

Cooling Inflation Indicators
Recent projections indicate a continued decline in inflation. The Federal Reserve Bank of Cleveland’s nowcasts suggest that the headline CPI inflation for June will increase by a modest 0.08%, while the core CPI, which excludes volatile food and energy prices, is expected to rise by 0.28%​ (Morningstar)​​ (Benzinga)​. These figures point to a gradual easing of inflationary pressures, aligning with recent trends seen in both CPI and Personal Consumption Expenditures (PCE) data.

Personal Consumption Expenditures (PCE)
The PCE index, which the Federal Open Market Committee (FOMC) prefers, is also expected to show moderate increases. The monthly headline PCE inflation is forecasted at 0.09%, with core PCE inflation anticipated at 0.21%​ (Benzinga)​. These projections reinforce the narrative of a slow but steady return towards the Fed’s 2% inflation target.

Key Components of Inflation

Shelter Costs
One of the significant contributors to the CPI is shelter costs, which have been rising rapidly. However, there are expectations that this component might cool down as the rental market shows signs of stabilization​ (Kiplinger.com)​. Should this cooling occur, it could significantly aid in lowering overall inflation rates.

Goods and Services
Prices for durable goods, such as vehicles, have started to decline, contributing to the overall decrease in inflation. Non-durable goods, while still experiencing some price pressures, are expected to benefit from improved supply chains and lower fuel costs​ (Morningstar)​.

Implications for Federal Reserve Policy

Interest Rate Decisions
The FOMC is closely monitoring inflation trends to inform its interest rate decisions. If June’s inflation data confirms the cooling trend, it could support a potential interest rate cut later in the year, possibly by September. However, this is contingent on continued positive inflation data in the subsequent months​ (Nasdaq)​. Current market expectations, as reflected in futures pricing, show a mixed outlook, with some anticipating rate cuts by late 2024​ (Nasdaq)​.

Economic Projections and Market Reactions
The Fed’s new economic projections, including the “dot plot” from its upcoming meetings, will provide further insights into the likely path of interest rates. Investors and economists will be watching closely for any signals from Fed Chair Jerome Powell’s press conferences following these meetings​ (Nasdaq)​.


June’s inflation data is expected to show further signs of cooling, contributing to a more optimistic outlook for achieving the Fed’s inflation targets. While this data alone may not be decisive, it will be a crucial piece in the broader economic puzzle that the FOMC uses to guide its monetary policy decisions. Investors should remain attentive to upcoming inflation reports and Fed communications to better understand the likely trajectory of interest rates and economic conditions in the near future.

by Steve Macalbry

Senior Editor,


Disclaimer: The author of this article is not a licensed financial advisor. This article is intended for informational purposes only. It should not be considered financial or investment advice. We do not hold any form of equity in the securities mentioned in this article. Always consult with a certified financial professional before making any financial decisions. Growth stocks carry a high degree of risk, and you could lose your entire investment.

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