Investors and regulators alike are eagerly awaiting the June Consumer Price Index (CPI) data set to be released on July 13.

                By                    Yaёl Bizouati-Kennedy

See: Ahead of the Consumer Price Index for June, Consumers’ Inflation Expectations Continue to RiseFind: Rent Prices Continue to Rise per Consumer Price Index: ‘Not Likely’ to Slow Soon, Expert Says

In May, the index increased 8.6% for the 12 months, the largest 12-month increase since the period ending December 1981, which has rattled the markets further. Following that data, the Federal Reserve raised interest rates by three-quarters of a percentage point rate on June 16, the first time it has done so since 1994. The move was widely anticipated and came amid a market that has entered bear territory and inflation at a 41-year high.

Fed Chair Jerome Powell said in a press conference at the time that given the inflation which has risen notably since March, “a larger increase was warranted at today’s meeting,” adding that it is “an unusually large one.” He added that because of the May CPI data “we thought that we needed to go ahead so we did.”

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Now, however, Morningstar.com notes that there is “increasing evidence that inflation appears to be peaking if it hasn’t already.”

So, what are the signs?

First, while the consensus estimates CPI to come in at elevated levels, according to FactSet, 8.8%, slightly higher than the 8.6% reading in May, this will be largely due to the price of oil, which started to drop in mid-June and has continued to fall into July, Morningstar reported.

In addition, experts will look at the core CPI, which excludes food and energy, to gauge the Fed’s next steps, Morningstar noted, adding that Core CPI for June is estimated to rise 5.7% year over year and 0.50% month over month, according to FactSet. That compares with May’s 6% year over year core CPI reading and 0.6% month over month.

Another factor that inflation might be cooling off is that the June job report, released July 8, came stronger than anticipated, which tampered fears of a recession.

Morningstar also points out to the Fed’s preferred gauge of inflation, the core Personal Consumption Expenditures (PCE) price index, Excluding Food and Energy, which stood at 4.7%, for May, down from 4.9% the prior month, and below expectations of a 4.8% increase.

Then, the prices on a range of commodities — oil and natural gas, wheat and corn, lumber and copper, among others — have fallen sharply in the past month. In addition, the housing market seems to have also cooled due to rising mortgage rates.

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Finally, Morningstar says that “the 5-year TIPS breakeven indicator, which tracks the yields on Treasury Inflation-Protected Securities to measure expected inflation. The 5-year TIPS breakeven rate has fallen one full percentage point since March, reflecting diminished concerns about inflation over the next five years.”

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