A monthly report on US consumer prices due Thursday is set to show a second straight reading for so-called core inflation that is consistent with the Federal Reserve’s 2% target on an annualized basis, according to Bloomberg Economics.

The consumer price index, excluding food and energy, probably rose 0.2% last month following a similar increase in June, Bloomberg economists Anna Wong, Stuart Paul and Jonathan Church wrote Wednesday in a preview of the report.

“July’s CPI report will show a wave of disinflation hitting the US economy,” Wong, Paul and Church said. “We believe the recent moderation in core CPI is being driven mainly by the deteriorating economic landscape, with past Fed rate hikes weighing on demand in more interest-sensitive spending categories.”

Thursday’s Bureau of Labor Statistics report will be pivotal in setting the tone for the debate over Fed policy in the coming weeks. Investors no longer expect the US central bank to continue raising interest rates after lifting their benchmark in July to the highest level in 22 years, and another set of subdued inflation numbers would serve to bolster that outlook.

Core inflation in particular has been a central focus for Fed officials. A moderation in rent increases and an outright decline in prices of used and new vehicles probably weighed on July’s figures, the Bloomberg economists said.

Here’s What Bloomberg Economics Is Expecting:

• The headline CPI may have risen 0.3% in July, while core CPI may have advanced 0.2%
• Core goods prices probably fell 0.3%, thanks in part to a 1.6% decline in used-car prices and a 0.5% drop in the price of new vehicles
• Primary rents probably rose 0.4%, following a 0.5% increase in June

While Thursday’s data may augur against additional Fed tightening, August numbers due in a month’s time may not look as favorable, the Bloomberg economists warned.

Still, with rising oil and gasoline prices set to boost the headline CPI in particular, “we expect policymakers to continue focusing on the core, which should keep moderating as growth slows,” they said.