Ahead of the highly anticipated February Consumer Price Index (CPI) report set to release on Tuesday, Citi Economist Veronica Clark joins Yahoo Finance Live to share her outlook.

Clark notes that she will closely monitor the CPI report's month-over-month change. While she anticipates a decrease in the yearly rate, she expects to see "some residual strength" in the monthly data point. However, following a strong January, she warns that there may be some stickiness in the February report regarding services inflation, which she notes "is not a great place for the Fed." Still, Clark forecasts that the first rate cut will occur in June, "and every meeting after June."

Despite recent jobs data pointing to a "reaccelerating economy," Clark highlights signs that the labor market is beginning to weaken, with hiring slowdowns and an uptick in unemployment.

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Editor's note: This article was written by Angel Smith

Video Transcript

BRAD SMITH: Well, investors are eagerly awaiting the latest read on inflation and what it will mean for the timing of rate cuts. CPI for the month of February is out Tuesday. The headline number year-over-year is expected to remain unchanged from January. But core CPI excluding volatile, food, and energy prices is expected to soften a bit to 3.7%, a slight decline from January's 3.9% reading.

Here with more, we've got Citi economist, Veronica Clark. Veronica, great to see you here this morning. All right. So the expectations are laid out. What though will this mean for the pathway for the Fed here and what data dependency and the trend that they're looking for in that data is actually signaling?

VERONICA CLARK: Yeah. Yeah. The most important thing that we're watching at 8:30 tomorrow morning is that the month-on-month change in core CPI. So the year-on-year rate should be falling. But we're actually expecting to see still some residual strength in that monthly number. We're expecting a 0.33% month-on-month increase in core CPI. Now, that's following a very strong January. I don't think we'll see quite a repeat of what we saw in January.

But there's still some stickiness to services inflation in particular. And that's not a great place for the Fed, but we kind of have seen Fed officials talking about maybe this is just some bumpiness on the path to 2% inflation. And they do still seem to want to be cutting rates as we're getting to the middle of the year. So I don't know if this February number will quite clearly change that quite enough. They still seem like they're going to be cutting.