Consumer prices likely rose just slightly in July, continuing a sluggish, and befuddling trend that puts the Federal Reserve’s ability to raise interest rates in doubt.

The latest print of the consumer price index comes Friday at 8:30 a.m. ET, and could have an impact on already jittery markets. The CPI is expected to climb 0.2 percent for July, or 1.8 percent year-over-year, but that is below the 2 percent inflation rate targeted by the Fed.

“[The Treasury market] is probably going to move more dramatically on a weaker CPI number,” said Ian Lyngen, head of U.S. rate strategy at BMO. The yield on the 10-year Treasury Thursday fell to its lowest levels since late June and stocks had one of their worst days of the year, on concerns about tensions between the U.S. and North Korea.

There’s been a tug-of-war between the markets and the Fed on inflation. The Fed has signaled it’s willingness to move ahead with interest rate hikes, as long as it sees potential for Inflation to rise. But the markets have priced in just a 40 percent chance of an interest rate hike by December, despite the Fed’s forecast for one more hike this year and three next year.

Inflation data is the hair trigger that could change that view.

“I think the market’s got this one wrong,” said Michael Schumacher, director of rate strategy at Wells Fargo. He said any number of things could change the market’s view, including what type of comments Fed officials make at their annual Jackson Hole symposium at the end of the month or at the FOMC meeting in September

“Whether it’s a stronger statement out of the Fed, or something coming out of Jackson Hole, or any actual announcement on Sept 20, all those things could do it. Or a strong CPI print could do it tomorrow possibly,” he said.

New York Fed President William Dudley reaffirmed that the Fed would like to move forward on interest rate hikes in a speech Thursday. The influential Fed official said inflation should gradually move toward the Fed’s 2 percent target and the Fed remains on track to raise interest rates.

“Our outlook anticipates a continued moderate growth trend, with some further strengthening in the labor market and an increase in inflation over the medium term toward our objective of 2 percent,” Dudley said in prepared remarks that did not specifically mention monetary policy.

The CPI has missed economists’ forecasts for the past four months. “It’s puzzling to some degree. There’s been one- off circumstances,” said Michelle Girard, chief U.S. economist at NatWest Markets. She pointed to the sharp decline in cell phone data costs as carriers changed their plan offerings this year. There have also been declines in apparel, medical equipment and automobile prices. Girard expects CPI to gain 0.14 percent.

Diane Swonk, CEO of DS Economics, said the phone data plans continue to impact the data, and the decline in gasoline prices probably resulted in more consumer travel. That could be lower gasoline but higher hotel rates. “I wouldn’t be surprised to see that show up in accommodations,” she said. PPI, reported Thursday, showed a 2.2 percent advance in accommodations, she said and while PPI and CPI are not closely related, those higher costs could be in both.

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