This Week’s U.S. Inflation Report Could Have Serious Implications for Stocks

A softer-than-expected number could pressure the Fed to signal an interest rate cut is likely in September — or even open the door to one later this month

by Joseph Adinolfi
Market Watch

Thursday’s inflation report is expected to be the main event for U.S. markets during a busy week that also includes the start of the second quarter corporate earnings reporting season, a handful of Treasury debt auctions, and potential developments in the presidential election race.

Like all marquee economic releases, the June consumer price index numbers could have serious ramifications for markets, but investors will be paying especially close attention this month, as the timing of the Federal Reserve’s first interest-rate cut could hang in the balance.

At the very least, a smaller than expected rise in inflation could encourage Fed Chair Jerome Powell to more forcefully prime the market for a rate cut at the Fed’s September meeting, but some believe that a sufficiently weak number could even open the door to a rate cut in a few weeks, something that futures-market traders have dismissed as extremely unlikely, according to CME Group data.

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