West Texas Intermediate crude oil futures have risen to nearly $80 a barrel. barrel from $67 at the start of the month, raising new concerns about inflation.
Focus on CPI and Warsh testimony
Investors will get a fresh read on price pressures on Tuesday when the Labor Department releases the June consumer price index at . 8:30 ET.
Economists surveyed by Bloomberg forecast headline CPI to fall below a 4% annual rate. The report is expected to show the first declines in both headline and core inflation since January, following May’s readings of 4.2% and 2.9% respectively.
Although the figures live up to expectations, they risk being viewed as backward-looking in light of the recent oil price increase. Should inflation instead prove to be more persistent, the data could reinforce concerns about the Fed’s path forward.
Attention will then turn to Mr. Warsh’s testimony on Capitol Hill. Given the Fed Chair’s preference for limited forward guidance, investors will be watching for any signals on interest rates and inflation.
According to analysts at ING, he could “if he chooses, emphasize the tameness of inflation expectations.”
They added that Mr. Warsh “has enough ammunition here to ride the risk of a rate hike and instead hold pat. Even if he comes under pressure to hike, the wealth attached to the 5-year portion of the curve tells us that any hike (if delivered) is likely to be subsequently reversed, with the prospect still of bigger cuts than hikes.”
