Global investors will be watching the next set of US CPI data with bated breath. Today, the Bureau of Labor Statistics will release the most recent US inflation numbers for June. The Consumer Price Index (CPI) tracks changes in the prices consumers pay for products and services. The CPI reflects the spending habits of two populations: all urban consumers and urban wage earners and clerical workers.

The June 2023 CPI data will be released on July 12, 2023, at 8:30 a.m. Eastern Time or 6 p.m. Indian Standard Time (IST). The June US inflation report will reveal if the Federal Reserve will suspend rate hikes at its July 25-26 meeting.

Update: US Inflation Nos released! Has the CPI data met expectations?

The annual rate of inflation fell to its lowest level in more than two years in May, with the consumer price index rising just 0.1% for the month and 4% year on year, the latter being the lowest level in nearly two years. Without food and energy prices, the picture was less rosy. Core inflation jumped 0.4% month on month and was still at 5.3% year on year.

FOMC which met last month on June 13-14 had decided to keep the interest rate unchanged. However, going forward, the Fed is expected to resume rate hikes by raising rates by 25 bps each in July and September. Sticky inflation and rising core-inflation data could lead to a market downturn. In such a circumstance, the Fed will be forced to maintain its aggressive tightening policy, and more bad news for the financial industry and economy may follow.

It is expected that the annual rate of headline inflation would decrease to 3.1% from 4% and core inflation (ex-food and energy) to 5% from 5.3% with a 0.3% MoM reading. However, even if it does not significantly change the chances of a raise in July, this might at least offer some relief and cause longer-term interest rate expectations to slightly decline. Following the June jobs data, which revealed a softening but still robust labor market, the Fed may not leave things for granted and remain aggressive in its approach to crushing inflation.

Investors are avoiding large bets ahead of today’s crucial inflation report, and traders were also digesting comments from many Fed officials, who continued to indicate the need for additional tightening this year. Higher borrowing rates have an influence on company profitability because corporations may have to pay more interest on existing debt or find it more expensive to finance new initiatives. This usually results in a drop in investor confidence and a drop in stock prices. The job market strength remains the biggest roadblock for the Fed and unless jobs data look favourable to the central bank, the stock market is not expecting a Fed pivot – the time when the rate cut begins.