Freedom Broker experts release a forecast for U.S. inflation and the market reaction

June inflation data in the U.S. will be the main driver of sentiment in global markets this week. Freedom Broker analysts believe that a deviation in the core Consumer Price Index (CPI) by even a few hundredths of a percent could significantly change investors’ expectations regarding the Federal Reserve’s дальнейшей policy and the performance of U.S. equities.

The market is sensitive to the Consumer Price Index

According to Freedom Broker experts, the consensus forecast for core inflation in June is 0.2% month over month and 2.8% year over year. The broker’s own forecast matches market expectations, but the details of the release will be decisive.

A reading below 0.2% will be a signal of a renewed disinflationary trend and could support growth stocks, the analysts note. At the same time, a figure of 0.25% and above will confirm persistent price pressures and strengthen expectations of a longer period of high interest rates, Freedom Broker experts emphasize. 

Why CPI data matter for investors

Inflation remains one of the key benchmarks for the U.S. Federal Reserve’s monetary policy. Faster deceleration in price growth increases the likelihood of monetary easing in the future and usually supports technology companies and other growth-sector issuers.

Market volatility remains elevated

Freedom Broker analysts point to ongoing geopolitical risks. Escalation in the Middle East and rising oil prices reinforce inflation expectations and increase uncertainty in global markets.

Against this backdrop, experts assess the balance of risks for U.S. equities as neutral, but warn of a high probability of sharp price moves after the inflation data are released.

Investors are waiting for signals from the regulator

The market is looking for signals regarding the Fed’s next steps. Earlier, Federal Reserve Governor Christopher Waller allowed for the possibility of tightening policy if high inflationary pressure persists, but noted the need to avoid an excessive response that could increase risks for the economy. An additional factor of uncertainty has been geopolitical events in the Middle East and rising oil prices, which could вновь reinforce inflation risks in the U.S. Therefore, June consumer price data are viewed by investors as one of the key indicators of the дальнейшей course of the U.S. central bank. 

This is not an individual investment recommendation.