U.S. Consumer Price Index (CPI) inflation decelerated beyond predictions in June, impacting the investor outlook on the Federal Reserve’s potential policy changes.

By The Numbers: The annual inflation rate in the U.S. dropped from 4% in May to 3% in June, making it the lowest reading since March 2021. The dip is just below the average economist prediction of 3.1%, marking 12 consecutive months of declining inflation.

Key highlights of June’s inflation report showed energy prices rising 0.6% after a 3.6% monthly drop in May and core inflation, which excludes volatile food and energy goods, increased 4.8% year-on-year.

The figures come well below May’s 5.3% reading and missed the 5% expectation. Read more on the CPI print here.

Markets reacted strongly to the data.

Trader estimates for the Fed's July meeting are unchanged, with a 0.25% rate hike remaining at a 92% likelihood. Treasury yields sharply declined and S&P 500 (NYSE:SPY) futures rose 1%, with Nasdaq 100 (NASDAQ:NDX) futures increasing by 1.2%.

PubMatic Inc (NASDAQ:PUBM), Pagaya Technologies Ltd (NASDAQ:PGY), and Microvision Inc (NASDAQ:MVIS) saw gains of 4.44%, 4.29% and 4.15% respectively.

Coherent Corp (NYSE:COHR) also saw a price jump, with a rise of 3.55%.

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