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  • Writer's pictureRealFacts Editorial Team

Powell's Testimony and CPI Expectations


Jerome Powell

On Tuesday morning, Federal Reserve Chairman Jerome Powell told the Senate banking panel that “labor market conditions have cooled while remaining strong.” His remarks about the labor market remaining strong surprised many investors, who had interpreted June’s weak job report as a sign that the Fed might cut rates soon. Powell emphasized that a significant deterioration in the labor market would increase pressure to lower the Fed's key interest rate from its current restrictive levels. However, his testimony before Congress underscored that such conditions are not imminent. Powell’s comments point investors back to the idea that inflation needs to fall closer to the Fed’s 2% target before any rate cuts can be considered, increasing the focus on Thursday’s upcoming consumer price index report.


Investors Business Daily author, Jed Graham, reported on the expectations for the upcoming CPI report. He wrote, “The next big data point comes on Thursday at 8:30 a.m., with the release of the June CPI. Economists expect a 0.1% overall CPI increase on the month, with a 0.2% rise in the core CPI, which strips out food and energy. But it could go either way. Deutsche Bank expects a 0.25% rise in the core CPI as May's decline in transportation services prices could lead to a rebound in June. However, Nomura predicts a tame 0.135% core CPI increase, thanks to lower prices for hotel and motel stays, as well as lower airfares.” Depending on whether core CPI moves up or down, the direction of the S&P 500 could vary: continued gains might occur if there are increased hopes of rate cuts, or it could pull back if investors lose confidence in a deflationary trend.

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