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Shelter costs were once a main driver of inflation, but that may finally be changing. Wednesday's CPI report for July will offer fresh clues.

Markets have bounced back nicely from the recent volatility, and it's becoming clearer each day that the recent turbulence was likely due to the unwinding of large leveraged positions, like yen-funded carry trades, rather than deeper concerns about global growth. The July CPI numbers might not show much improvement from the previous month, but as long as there isn’t a big surprise, investors might still hope for the Fed to start easing in September. Futures markets currently show a 54% chance of a 50 basis point cut by the Fed, with a 46% chance of a 25 basis point cut, and traders are pricing in a full percentage point of easing by year-end.

Stocks jumped after a cool PPI reading for July, setting the stage for consumer price inflation to show improvement when CPI is released Wednesday.

(Bloomberg) -- Stocks rallied and bond yields fell after the latest US inflation reading reinforced speculation the Federal Reserve will be able to deploy its widely anticipated interest-rate cut in September.Most Read from BloombergBiden Invests $100 Million to Fuel Housing ConstructionIn DNC, Chicago’s Embattled Transit System Faces a High-Profile TestJohannesburg Mayor Quits Amid Infighting, Financial WoesHow Chicago’s Gigantic Merchandise Mart Is Still Thriving as Office SpaceGottheimer Call

The S&P 500 added 1.7% on Tuesday, Aug. 13, as data showing softer-than-expected gains in wholesale prices reinforced rate-cut expectations.