US CPI Prep

On Wednesday the 12th of February, at 08:30 ET, the BLS is set to release the latest US CPI report for the month of January.
Here are some views on what to expect.

Overview
For US CPI YoY, the median forecast expects it to remain unchanged at 2.9%.
According to a survey of 39 qualified economists, the highest estimate is 3.1%, and the lowest is 2.5%.
For US CPI MoM, the median forecast is 0.3% from the prior 0.4%.
The highest estimate is 0.4% and the lowest is 0.2%.

Fore Core CPI YoY, the median forecast is 3.1%, from the prior 3.1%.
The highest estimate is 3.3%, the lowest is 2.9%.
Core CPI MoM median forecast is 0.3%, from the prior 0.2%.
The highest estimate is 0.4%, the lowest is 0.2%.

General Expectations
If CPI comes in higher than expected, we would expect to see weakness in US stocks, and strength in the dollar and government bond yields, as this would cause markets to pull back further on bets for further Fed interest rate cuts, as rates may need to stay higher for longer in this environment to make sure inflation is coming sustainably down to the Fed’s target.

If CPI came in lower than expected, we would expect strength in US stocks, and weakness in the dollar and government bond yields, as this would indicate that inflation is continuing to come down to the Fed’s target, which could increase the likelihood that the Fed can move forward with further interest rate cuts.

Commentary
Wells Fargo
A hot streak of CPI prints in early 2024 ended the notion that normalizing supply conditions would be enough to return inflation to the Fed’s 2% target.
The first major inflation reading for 2025 is likely to show that inflation remains stubbornly strong. We estimate the headline index rose a “high” 0.3%, which would leave the year-over-year rate unchanged at 2.9%.
The core index also looks set for a 0.3% advance that we expect to be driven by the ongoing rebound in goods prices and a pickup in non-housing services.

Seasonal adjustment factors will be updated with the upcoming release to reflect the most recent year’s price movements.
The incorporation of 2024 figures should lead the seasonal factors to “expect” more strength in January and February.
If realized, more moderate price increases at the start of this year would unlock favourable base effects and lead to a slowing in the year-over-year rate of inflation in Q1.
Yet, we expect the 12-month rate of inflation to move sideways through the remainder of the year, as further services disinflation is offset by higher goods inflation now that additional tariffs are in the works.

Unicredit
The January CPI report will be closely watched since many prices are reset at the beginning of the year and new seasonal factors are applied.
We expect both headline and core CPI inflation rose 0.3% mom in January, leaving the year-on-year rates unchanged, at 2.9% and 3.2%, respectively.
We expect to see an upward contribution to monthly inflation from core-goods prices (in part reflecting a frontloading of demand ahead of potential tariff increases), while housing-price inflation is unlikely to have changed much.
Sticky inflation and the Fed in no rush to cut interest rates (a stance Jerome Powell will likely reiterate in his semi-annual testimony before Congress next week) are likely to further push up yields on USTs.

Credit Agricole
For CPI, we the expect the headline metric to rise 0.3% MoM, slightly down from 0.4% MoM in December, with the YoY rate holding steady at 2.9%, though our forecast is not too far from rounding up to 3.0%. We also expect core to rise 0.3% MoM, ticking back up after slowing to 0.2% MoM last month, which would result in an unchanged YoY rate of 3.2%, though in this case we see some chance of rounding down to 3.1%.
On its own, a CPI report in line with our expectations would suggest little urgency for the Fed to cut further.

Previous Release
On January 15th at 08:30 ET, the BLS released the US CPI numbers for the month of December.
US Core CPI came in cooler than expected this month, YoY was 3.2% on expectations and a prior of 3.3%. Core MoM was 0.2%, on expectations and prior of 0.3%.
Headline CPI YoY and MoM was as expected at 2.9% and 0.4% respectively.

The lower than expected reads in core inflation this month lead to weakness in the dollar and government bond yields and strength in the S&P 500, as traders began to increase bets on Fed rate cuts this year.