When the latest US consumer price data was released last Wednesday, the benchmark was outrageous.

Inflation rose to 9.1% in June.This is evidenced by data from the Bureau of Labor Statistics. This is higher than expected by economists polled by Refinitiv.

Also much higher than indicator of 8.6% recorded in Maywhich shocked the financial markets and prompted the Federal Reserve to raise interest rates more aggressive – increasing doubts about whether the central bank will be able to control inflation without triggering a recession.

Investors were preparing for a surprise. But there is reason to believe that Wall Street’s reaction to these numbers will be more restrained than it was last month.

“Politicians and investors alike will easily handle this new high,” Joseph Brusuelas, chief economist at RSM US, told me.

Because? A closer look at the inflation data shows that while the situation is worrisome, there are some reasons for optimism.

1. Core inflation. Annual core inflation, which drives food and energy price volatility, appears to have peaked in March. Federal Reserve officers are more worried about signs that inflation is widespread, so this scenario offers some hope that the situation is improving, even with skyrocketing food and fuel prices.

Core inflation fell from 6% in May to 5.9% in the 12 months to June. This decline could continue if consumer demand for goods continues to decline and shoppers avoid high prices and redirect their income to services such as eating out.

2. The price of oil. Fears that the global economy could slip into recession dampened expectations for fuel demand, helping ease pressure on US gasoline prices this month. The average price of a gallon of conventional fuel last Wednesday was $4.63, up from $4.78 a week ago and $5.01 a month ago.

This was not reflected in the June data as the price of gasoline was at an all-time high when the Bureau of Labor Statistics compiled the consumer price index. The gasoline index rose 11.2% between May and June.

But that means July is likely to be better, and markets like to look ahead.

3. Long-term inflation expectations. One study by the Federal Reserve Bank of New York published this week showed that while consumer inflation expectations for the coming year reached a new peak in June, medium and long-term expectations have weakened.

This shows that American consumers still believe that the Federal Reserve Bank will be able to control inflation by raising interest rates and stopping bond purchases during the crisis. The economy may slow down, but price stability will eventually be restored, as will much-maligned confidence in central banks.

Said that: Core inflation remains extremely high, well above the central bank’s target of around 2%. On a monthly basis, it seems to be accelerating, which is bad news. And there are signs that inflationary pressures are spreading to parts of the economy where they are likely to persist for some time, such as the housing and rental markets.

housing index grew by 5.6% for the last year. This was the largest increase since February 1991. During the same period, home furniture prices rose by 9.5%, while airfare increased by more than 34%.

Looking to the future: when inflation starts to decline, will it return to pre-pandemic levels?

Some senior officials, including Federal Reserve Chairman Jerome Powell and Agustin Carstens, who heads the Bank for International Settlements, acknowledged at a summit in Portugal late last month that there is a risk that we could enter a period of persistently high inflation if central banks do not quickly take control of the situation.

“The big question for me is whether we are in the process of transitioning from a low-inflation regime to a high-inflation regime,” Brusuelas said.

Oil prices take center stage in Biden’s trip to the Middle East

When President Joe Biden arrived in the Middle East, he was accompanied by the specter of high oil prices, which pose a growing political risk to the White House.

But recent market movements may lower expectations for this trip. World oil prices fell 7% on Tuesday to below $100 a barrel, and are down 13% this month. The price of oil in the US fell below $96 a barrel, with a fall of more than 9% in July.

On Wednesday, the International Energy Agency softened its forecasts for global oil demand for this year, pointing to “higher prices and a worsening economic situation.” At the same time, some restrictions on the supply were lifted with constant access to barrels of Russian origin.

However, the Paris agency warned that huge unknowns lie ahead.

“Forecasts for oil markets are rarely more uncertain,” the monthly report says. “Deteriorating macroeconomic outlook and recession fears weigh on market confidence, while there are persistent supply-side risks.”

Much of the recent price drop has been attributed to the risks of China’s “zero Covid” policy. While major cities have eased their toughest restrictions, a rising number of cases and the emergence of a highly infectious sub-variant of Omicron in Shanghai have raised concerns about a return to massive lockdowns.

China is the world’s second largest oil consumer after the US. China’s crude oil imports fell sharply in June from May, according to government data released this week.

what follows: Biden is not safe. Given the market restrictions, oil prices most likely do not have room for further decline. This means that it would be good for the United States if countries like Saudi Arabia and the United Arab Emirates increased their production using their existing capacity.

“I think we are at the top,” Rohan Reddy, director of research at the Global X ETF, told me. “Now there is not enough supply.”