C.P.I. Seen Climbing 4.9 Percent in June

A key measure of inflation most likely rose rapidly for a third month in June, economists expect, a gain that could keep concerns over rising prices front and center at the White House and Federal Reserve.

The Consumer Price Index, the Labor Department’s measure of how much consumers are paying for purchases like rent and airfare, climbed by 4.9 percent in the year through June, economists surveyed by Bloomberg predicted. That would mean the pace of increase ticked down slightly — it was at 5 percent for the year through May — but remained high, bolstered by consumer demand as the economy reopens and by a quirk in the data.

Investors, lawmakers and central bank officials are watching the changes closely. Quick price gains can squeeze consumers if wages do not keep up, and if they appear to be sustained it could prod the central bank to pull back on support for the economy. The central bank’s cheap-money policies are generally good for markets, so a rapid withdrawal would be bad news for investors in stocks and other asset classes.

Policymakers do expect inflation will fade as the economy gets through a volatile and unprecedented pandemic-reopening period, but how quickly that will happen is unclear. Prices have climbed faster than officials at the Fed had predicted earlier this year, some measures of consumer inflation expectations are starting to rise — a factor that could make inflation a self-fulfilling prophecy — and some officials at the central bank are increasingly wary of the changes.

Here is what to watch when the report comes out at 8:30 a.m.

Monthly Data:

  • The C.P.I. is expected to have risen 0.5 percent from May, the Bloomberg survey showed as of Monday afternoon. That would be slower than the 0.6 percent month-over-month increase the prior month.

  • Stripping out volatile food and fuel prices, the C.P.I. probably climbed 0.4 percent, down from 0.7 percent the prior month.

Annual Data:

  • The C.P.I. is expected to have risen 4.9 percent in the year through June, slower than the 5 percent in the year through May.

  • Stripping out volatile food and fuel prices, the C.P.I. probably climbed 4 percent over the past year, up from 3.8 percent in the year through May. That would be the fastest pace since 1992.

Car Prices, Rents and Restaurants

  • Used car prices have been jumping thanks to a semiconductor shortage that has slowed auto production, and June may have been the tail end of that trend, economists at Goldman Sachs wrote in a preview note.

  • Shelter costs are another area to watch: Rent and a rental equivalent for owner-occupied houses have been firming. Because they make up nearly a third of overall inflation, that strengthening could matter a lot to price gains going forward.

  • The “food away from home” category could also prove interesting. Restaurants have seen demand surge even as they struggle to hire, and many have raised wages to attract workers. They may try to pass those costs along.

The Base Effect and PERsonal Consumption Expenditures

  • The “base effect” is a wonky way to say that because prices fell last year, gains in the price index look artificially high this year. The quirk was at its most extreme in May. It should start to fade slightly in June’s data, though it remains a factor behind the larger-than-usual increase.

  • Analysts watch the C.P.I. closely because it is more timely, but the Fed actually targets a related but different index when aiming for its 2 percent average inflation goal. That measure, the Personal Consumption Expenditures index, tends to come in slightly lower. It too has accelerated this year.