The Federal Reserve's megaphone: Today's CPI report will not change the direction of the Federal Reserve's policy

Nick Timiraos, the Fed's mouthpiece, recently wrote: "June's inflation numbers are likely to keep Fed officials cautious, and policymakers who had predicted that tariffs would trigger more significant price pressures later this year may not have much reason to change their view when they see June's data - especially if retailers delay price adjustments as much as possible. June's data will only make the upcoming July and August data more important. Similarly, policymakers who believe tariffs will not trigger significant inflation (because companies do not have enough pricing power to support higher inflation) have little reason to change their views when they see Tuesday's report." In recent weeks, Federal Reserve Chairperson Jerome Powell has suggested that the threshold for a rate cut could be slightly lower than it was in the spring. The shift reflects an assessment that inflation risks are likely to take longer to materialize and therefore have a relatively weak impact. If the Fed maintains its expectation that "inflation acceleration will not be too sharp", Powell could open the door to a rate cut as early as September, based on factors such as a weaker labour market or better inflation data. "