US CPI Prep

Ranges For Upcoming December CPI Data
US CPI YoY Forecast 2.7%, Previous 2.7% Range 2.9% / 2.5%
US CPI MoM Forecast 0.3%, Previous 0.2% Range 0.5% / 0.1%
US Core CPI YoY Forecast 2.7%, Previous  2.6% Range 3.1% / 2.6%
US Core CPI MoM Forecast 0.3%, Previous 0.2% Range 0.5% / 0.2%

Investment Bank Thoughts
HSBC
Our economists note that the November reading came in well below consensus in part due to technical factors around rent calculations and seasonal patterns. This could present equivalent upside risks to December’s data as the technical distortions are ironed out. Like the consensus, our economists are looking for a 0.3% MoM reading on both the headline and core readings. If correct, it is hard to see Fed rhetoric turning more dovish ahead of its pre-FOMC blackout period.

JPMorgan’s Feroli
For CPI, he sees headline MoM printing +0.38% and Core MoM printing +0.41%. This equates to 2.7% YoY for Headline and 2.8% YoY for Core. Feroli notes that the BLS effectively held prior month prices constant due to the government shutdown which should lead to a significant increase in this print. Further, it is likely that the BLS over-sampled holiday sales prices in the prior print such that goods inflation was artificially lowered. While this may not be a ‘clean’ CPI print, the setup is one where markets are bulled up, but the data suggest that a hawkish print is more likely than a dovish print; however, the market outcomes are skewed bullishly.

ING
We would have had a moderately bullish view on the dollar this week as we expect tomorrow’s US core CPI to come in above consensus at 0.4% month-on-month, and markets are more relaxed about the jobs market after Friday’s drop in unemployment to 4.4%.

Previous CPI Release: October & November Data Combined
US CPI YoY Actual 2.7% (Forecast 3.1%, Previous 3%)
US Core CPI YoY Actual 2.6% (Forecast 3%, Previous 3%)
US CPI MoM Actual 0.204% (Forecast 0.3%, Previous 0.3%)
US Core CPI MoM Actual 0.159% (Forecast 0.3%, Previous 0.2%)

Report & Market Reaction Summary
The latest BLS CPI report shows inflation continuing to cool on a year-over-year basis, with CPI up 2.7% and core CPI up 2.6%. Because prices were not collected in October due to a lapse in appropriations, the report focuses on the two-month change from September to November, when both headline and core CPI rose 0.2% on a seasonally adjusted basis. Over that period, shelter rose 0.2%, energy rose 1.1%, and food rose 0.1%, while over 12months, energy was up 4.2% and food was up 2.6%, indicating energy remains the main swing factor even as broader inflation stays near the Fed’s comfort zone.