Excluding food and energy, economists see a 4% year-over-year rise and a 0.4% month-over-month gain in consumer prices. The so-called core numbers rose at 3.8% and 0.7% clips, respectively, during May.

Hot inflation prints over recent months have largely been chalked up to what the Federal Reserve has said is the base effect, or a comparison to depressed levels from a year ago that make current numbers look higher than they otherwise would. 

We note, however, that comparisons to negative pandemic prints ended in May. Starting in June 2020, monthly inflation numbers bounced from negative levels that accompanied shutdowns. Tuesday’s CPI reading, then, will be the first since inflation started surging where the base effect isn’t at least partially to blame.

That isn’t to say there aren’t still temporary factors at play. Economists at Citi, for example, predict strength in “transitory” components including used cars, hotels and airfares. At the same time, they “increasingly see potential for upside surprises to more persistent components.” Key to gauging how sticky inflation really is: shelter prices. Investors should keep an eye on both primary rents and owners’ equivalent rents, which rose 0.2% and 0.3%, respectively, in May.

“We see substantial uncertainty around the market implications of the June CPI print,” the Citi economists say, adding that strength in components such as rent or even restaurant prices could signal more-persistent inflation that would push U.S. Treasury yields higher.

Check back after 8:30 a.m. Eastern time for news and analysis. 

Write to Lisa Beilfuss at lisa.beilfuss@barrons.com