U.S. CPI May Post First Monthly Decline in Over a Year, Analyst Says

U.S. headline CPI inflation may record a negative monthly reading for the first time in more than a year, which could ease market concerns about an imminent Federal Reserve rate hike, analyst Matthew Weller said. According to Jin10, Weller said the key question ahead of the June CPI report was whether inflation had already peaked. He said the Strait of Hormuz partially reopened in late June for the first time in three months, contributing to a sharp drop in energy prices. He added that the lagged impact of U.S. President Donald Trump’s now-expired “Liberation Day” tariffs may have largely been absorbed by the market. In this context, Weller said traders and economists expected the overall monthly inflation rate to turn negative, which would reduce worries about the Fed raising rates soon. He said the federal funds futures market was pricing a 35% probability of a rate hike at the Fed’s meeting this month, after last month’s meeting took a relatively hawkish tone under new Fed Chair Kevin Warsh. Weller said the hawkish view might be overly optimistic, but an unexpectedly strong CPI report, combined with Chair Warsh’s appearances before Senate hearings on Tuesday and Wednesday, could still trigger unusual volatility in major markets amid uncertainty.