US consumer inflation likely turned negative in June on a monthly basis as energy prices pulled back, Goldman Sachs and UBS Securities said.
Oil and gasoline prices have retreated as the US and Iran agreed to an interim peace deal in June. However, crude prices, which posted gains last week amid escalating US-Iran tensions, rallied on Monday as President Donald Trump reinstated the US blockade of Iranian ports.
Goldman Sachs projects the consumer price index to fall 0.1% month over month for June, reflecting lower energy prices. Core inflation likely rose 0.17% and 2.76% annually, the brokerage said in a weekly update emailed toon Monday.
Official data on Tuesday are expected to show that the headline CPI dropped 0.1% in June on a sequential basis and rose 3.8% annually, according to a Bloomberg-compiled consensus. Wall Street is projecting core CPI, which excludes volatile items such as food and energy, to rise 0.2% month over month and 2.9% annually.
Earlier this month, Federal Reserve Chair Kevin Warsh said that inflation risks had eased. The Fed kept its policy rate steady last month for the fourth consecutive meeting following a series of rate cuts last year.
UBS expects a negative 0.25% print for June's headline CPI, which it said would be the steepest one-month decline since April 2020. On an annual basis, UBS anticipates headline inflation easing to 3.7% from 4.2% in May, which was the fastest pace of price growth since April 2023.
Gasoline and other energy commodities will likely subtract 0.42 percentage points from the monthly headline CPI change, UBS economists wrote in a note last week.
There's a 59% likelihood that the Fed will keep its monetary policy unchanged later this month, down from 74% a week ago, according to the CME FedWatch tool. The odds of a 25-basis-point rate increase moved to 41% on Monday from about 26% a week earlier.
