Markets are focusing on the July CPI report, which will be released at 8:30 a.m. ET on Wednesday. Economists expect headline CPI to rise 0.1% month-over-month, bringing annual inflation to around 3.4%, while core CPI is expected to increase 0.2% monthly and remain at 2.5% year-over-year.

The key question is whether inflation continues to cool enough to support the Fed’s current rate path. A softer-than-expected CPI could strengthen expectations for future policy easing and support risk assets, while a stronger inflation print may push investors to reconsider the timing of rate cuts.

Overall, this CPI report is less about the current inflation level and more about the Fed’s next move. As markets move closer to the next policy meeting,…