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The Consumer Price Index (CPI), due to be released today, is expected to show prices increased at an annual rate of 3.0%, the same as it was in June. The easing of price pressures has bolstered confidence US officials can start lowering borrowing costs while refocusing on the labor market, which is showing greater signs of slowing. A survey conducted by 22V Research showed 52% of investors expect the reaction to Wednesday’s consumer price index to be “risk-on” but the percentage of respondents expecting a “recession” has stayed elevated.

Today’s consumer inflation update is far more relevant to near-term policy given disinflationary data is being celebrated by investors – not for its signaling of a slowing economy here in the US — but to solidify improving liquidity conditions ahead via the much anticipated rate cuts starting presumably in September. Negative economic data will undoubtedly put pressure on long positions in the market making today’s report that much more important for investor sentiment heading into the fall.