The highly anticipated U.S. consumer price index (CPI) inflation report for June, set to be released on Wednesday, takes the spotlight as the most significant economic event of the week.

Traders are now anxiously awaiting what is likely to be the most critical data reading for the Fed’s policy path ahead.

The CPI report comes on the heels of conflicting economic data for the job market, including outstanding ADP private sector employment growth of 497,000; lower-than-expected nonfarm payrolls (209,000 versus 225,000); and stronger wage growth.

While a rate hike in July is already widely expected, the market remains uncertain about the possibility of two rate hikes this year. Currently, the chances of another rate rise in September or November are valued at 22% and 34%, respectively.

US June CPI Inflation: Forecasts

• Headline CPI at 3.1% year-on-year (YoY): Economists anticipate the annual U.S. headline inflation rate to further ease in June, dropping from 4% to 3.1%. This would mark the 12th consecutive month of declines and the lowest reading since March 2021. On a monthly basis, the headline CPI is expected to show a faster pace of growth at 0.3%, compared to the 0.1% recorded in May.

• Core CPI at 5% YoY: Analysts project a slowdown in the annual U.S. core inflation rate for June, with a decline from 5.3% to 5%. If realized, this would be the lowest level since November 2021. On a monthly basis, the core CPI is expected to show a slight deceleration in the rate of increase, going from 0.4% to 0.3%.

Chart: Will the US CPI Continue to Fall?

What Was the Market Reaction to Previous CPI Readings?

The headline CPI came in below market expectations for the last three inflation reports.

Read More: We Are On A ‘Golden Path’ To Lower Inflation Without Recession, Fed’s Goolsbee Says

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