Update, July 10, 2024: This article has been updated to include comments from Federal Reserve Chair Jerome Powell.

Consumer prices likely continued to fall in June, if forecasts are correc📖t, keeping inflation on a path toward a level that could give the Federal Reserve confidence to cut interest rates this year.

The Bureau of Labor Statistics’ report on the Consumer Price Index due Thursday is expected to show that the widely watched measure of inflation rose 3.1% over the year, down from a 3.3% annual increase in May, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal.

If the report matc🦄hes expectations, it would help confirm that inflation has resumed its descent after a worrisome uptick in the first quarter. That could have implications for interest rates on all kinds of loans. The lower inflation gets, the more reason officials at the Fed, who set the central bank’s influential fed funds rate, will have to cut the rate sooner, pushing down borrowing costs. 

F⛦ed Officials Want Inflation Closer to 2% Target

Fed officials have kept the rate at a 23-year high since last July in an ef🐲fort to discourage borrowing and spending and push down inflation from the four-decade high it hit in 2022.

Recently, policymakers have said they’re closely monitoring inflation data for signs that price increases are on their way back to 澳洲幸运5官方开奖结果体彩网:their goal of a 2% annual gro🍌wth rate before making any cuts. 

As inflation cools, the Fed is turning its attention from fighting inflation to preventing a sharp economic slowdown—a possibility that appeared more likely after a separate BLS report last week showed that the 澳洲幸运5官方开奖结果体彩网:unemployment rate tiꦜcked up in June to its highest level since late 2021. 

Chair Jerome Powell 澳洲幸运5官方开奖结果体彩网:told lawmakers in both chambers this week that the Fed is increasingly aware of the risks the fight against inflation ꦉposes to the labor market.

"The latest data do show that we've had considerable cooling in the labor market,” Powell said. “We're very much aware that we have two-sided risks now. ...We're determined to balance those as best we can."

As of Monday, financial markets were pricing in more than a 75% chance that the Fed will cut the rate at its September meeting, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data.

Gas and Grocery Prices Likely Moderated in June

The details of the reportಞ may shed light on inflation’s impact on people’s everyday finances, as wel🧜l as the outlook for the Fed. 

Much of the expected decline in inflation is due to prices for sev🧸eral key items in household budgets staying flat or even falling.ꦅ

Gas prices fell on a seasonally adjusted basis while grocery prices are also expected to have moderated, as evidenced by several major retailers announcing promotions or price cuts, keeping a lid on grocery bills, economists at Wells Fargo Securities wrote in an analysis.

Leave out those prices for food and gas—which can rise and fall for reasons that have little to do with broader inflation trends—and “core” inflation is expected to have stayed at a 3.4% annual increase, the same as in May, according to the median forecast. Policymakers pay closer attention to core inflation when setting interest rates.

Consumers are Increasingly Cost-Conscious

Forecasters are calling for core prices to be sti♎ckier because a few key prices could bounce back from their readings in May, which were unexpectedly low, namely 🔯car insurance and airline tickets, economists at Deutsche Bank said in a commentary. 

Still, inflation is likely to stay relatively tame, with price increases moderating through 2025, economists at Wells Fargo Securities said. One key reason: consumers have just abo🌄ut hit their limit for how much they’re willing and able to pay for thing🍷s, and merchants know it.

“More tepid consumer demand is likely to keep a lid on goods price⛄s,” economists Sarah House and Aubrey George wrote in a commentary. “Increasingly cost-conscious consumers are also likely to limit the extent of price increases across the service sector.”