Inflation expected to have eased in July but stayed above pre-Iran war level
Inflation reached its highest level in three years, before cooling off in June.
An inflation report on Wednesday is set to provide the latest gauge of price increases as the Iran war pushes up costs for gasoline and other products.
The reading, which will detail inflation in July, arrives days after government data showed unexpected job losses last month, suggesting strain on the economy as a months-long bout of elevated price hikes weighed on shoppers.
Prices are expected to have climbed 3.4% over the year ending in July, which would mark a slight cooldown from 3.5% annual inflation recorded in June.
The anticipated reading would clock in more than a percentage point higher than the Federal Reserve's target rate of 2%.
The Iran war drove up gasoline prices and catapulted inflation to a three-year high in May. A preliminary peace agreement in June offered up some relief, but a burst of on-again, off-again fighting over ensuing weeks caused crude prices to climb.
Global oil prices stood at about $89 a gallon on Tuesday afternoon, keeping them well above pre-war levels.
The national average price of a gallon of gas registered at $4.01 on Tuesday, AAA data showed, marking a 34% rise since the outbreak of war in late February.
A months-long bout of elevated inflation has raised the chances of an interest rate hike, futures markets show. Investors peg the odds of a quarter-point rate hike next month at nearly 50%, according to the CME Group's FedWatch Tool, a measure of market sentiment.
The odds of a rate increase have ticked lower since last week, however, when a lackluster jobs report showed the labor market had shifted into reverse.
The U.S. lost 23,000 jobs in July, according to the federal government's monthly jobs report, which marked a decline from 57,000 jobs added in June.
The unemployment rate fell slightly from 4.2% in June to 4.1% in July. Unemployment remains low by historical standards.
A government report issued last week showed a steeper slowdown in gross domestic product than expected over three months ending in June, indicating softness in the underlying economy over the early months of the war.
The Fed could raise interest rates in an effort to cool off prices, but the move risks an economic slowdown that may pinch hiring.
Fed Chair Kevin Warsh, who took the helm of the central bank this summer, has repeatedly vowed to dial back inflation.
"The committee remains resolute -- you’ve heard this before -- that we will deliver price stability," Warsh told reporters in Washington, D.C., last month.
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