Also, the construction of the index plays a role: Units are sampled only every six months, which means changes in rents take time to work through the monthly data.¹⁾

Shelter, which accounts for about a third of the CPI, has proved the most stubborn.²⁾

Today’s US CPI print will be important for markets as it may shed some light on what the Fed could do next week when they meet

However, much will also depend on US CPI data for June, which will be released tomorrow. This is important for markets, as it will shape expectations on monetary policy from the US Fed in the months ahead. A number above year-on-year consensus (3.1%) would likely put some pressure on risk assets.

Many traders have fresh memories of the last CPI print on Feb. 13, which showed core US consumer prices climbed by the most in eight months. That sent the S&P 500 down 1.4% — the gauge’s worst CPI-day since September 2022, according to data compiled by Bloomberg. 

A hotter-than-expected reading would push back the timeline for when the Fed starts its easing cycle

With consumer-price growth slowing but likely to still come in well above the 2% target, the UK central bank is in no rush to move toward easing for now. 

The analyst highlights that escalating fuel prices are influencing headline Consumer Price Index (CPI) trends, thereby potentially limiting the scope for central banks to implement rate cuts.³⁾

Energy costs of all sorts, including motor fuel, electricity and piped gas, make up nearly 7% of the U.S. consumer-price index.

Nevertheless, we have to remember that while energy has a high weighting within the CPI basket, it is dwarfed by housing components which will continue to exert the main directional pull on inflation overall.

Tuesday’s CPI report is forecast to show a 0.4% rise in prices from January to February, with the main headline inflation figure expected to be unchanged from the prior month. Core CPI, which strips out volatile food and energy components and is seen as a better underlying indicator than the headline measure, is projected to rise 0.3% month over month and climb 3.7% from a year earlier.