US CPI Prep

On Friday the 13th of February at 08:30 ET, the BLS releases the US CPI report for January, alongside the Annual CPI Revisions.
Here are some views on what to expect.

General Expectations
Forecasts subject to change
CPI YoY – Forecast: 2.5% | Prior: 2.7% | Range: 2.7% / 2.3%
CPI MoM – Forecast: 0.3% | Prior: 0.3% | Range: 0.4% / 0.1%
Core CPI YoY – Forecast: 2.5% | Prior: 2.6% | Range: 2.7% / 2.3%
Core CPI MoM – Forecast: 0.3% | Prior: 0.2% | Range: 0.5% / 0.2%

What to Expect
US Stocks
A cooler-than-expected January CPI print could support equities, particularly rate-sensitive sectors such as technology and consumer discretionary, as it strengthens expectations for policy easing.
A hotter-than-expected reading may weigh on stocks, tightening financial conditions and raising concerns about prolonged restrictive policy.
US Dollar
Stronger inflation data typically supports the US dollar, as it reduces expectations for near-term Federal Reserve rate cuts.
A softer CPI print may pressure the dollar, with markets leaning toward a more dovish policy outlook.
US Government Bond Yields
Higher-than-expected inflation would likely push yields higher, reflecting delayed rate-cut expectations and persistent inflation risk.
Lower inflation readings generally lead to lower yields, as markets price in easing and reduced inflation pressure.
Federal Reserve Policy
A firm January CPI, especially in core services, would reinforce a higher-for-longer stance, encouraging the Fed to remain cautious about easing.
A softer inflation profile would strengthen the case for a more accommodative policy path, increasing confidence that inflation is moving sustainably toward target.

Commentary
Wells Fargo
The December US jobs report painted a mixed but broadly cooling picture. Nonfarm payrolls rose 50k, below expectations of 70k, while the unemployment rate fell to 4.4% versus a 4.5% forecast. Job gains remained concentrated in food services, health care, and social assistance, while retail trade shed jobs. Hiring momentum continues to slow, with 2025 payroll growth running well below 2024 levels and prior months revised lower. Wage growth held at 3.8% y/y, but the average workweek edged down, pointing to softer labour demand.

Looking beyond the headlines, the report showed rising slack beneath the surface. Long-term unemployment has increased over the year, part-time employment for economic reasons remains elevated, and participation was unchanged. Firms appear to be adjusting through reduced hours and slower hiring rather than outright layoffs, leaving the labour market intact but clearly less tight than earlier in the cycle.

Markets focused on this underlying cooling rather than the lower unemployment rate. Equities strengthened and the dollar weakened, even as traders modestly increased pricing for a pause in rate cuts following the drop in the jobless rate. The payroll miss, downward revisions, and softer hours reinforced the view that labour momentum is fading without breaking, supporting the soft-landing narrative. That combination limits upside pressure on rates and favours risk assets over the dollar despite the superficially firmer unemployment print.

Bank of America
Monthly inflation likely accelerated in January, with both headline and core CPI forecast to rise 0.3% m/m and hold at 2.5% y/y. Tariff pass-through, alongside the typical “January effect,” is expected to support firmer monthly readings, with the headline NSA index projected at 325.491.

Core goods prices are seen rising 0.40% m/m (0.35% ex-used cars), reflecting another leg of tariff-related price pressure and the seasonal tendency for inflation to run hotter early in the year. Updated seasonal factors could damp some of this start-of-year bias, but indicators like the Adobe Digital Price Index suggest goods inflation has strengthened.

Core services inflation is expected to cool modestly versus December, rising 0.26% m/m as lodging away from home and airfares moderate after strong prior prints. Rents and OER should remain broadly in line with recent trends. Core PCE is still tracking around 3.0% y/y, and inflation is likely to remain “not too hot, not too cold,” with limited near-term influence on policy unless demand-driven pressures or inflation expectations re-accelerate.

Credit Agricole
CPI has been very noisy due to the shutdown, though January should offer a cleaner report. We project 0.3% MoM increases for both headline and core, though the headline forecast is right on the cusp of rounding down, with YoY headline dipping to 2.5% from 2.7% and YoY core to 2.5% from 2.6%, though our core forecast is close to rounding down.

Previous Release
US inflation remained firm but contained in December. Headline CPI rose 0.3% m/m and 2.7% y/y, unchanged from November, while core CPI increased a softer 0.2% m/m, leaving core inflation at 2.6% y/y. Shelter again did most of the work, rising 0.4% on the month, while food prices surprised higher with a 0.7% gain. Energy prices rose 0.3%, as higher natural gas costs offset a decline in gasoline.

Under the hood, inflation pressures were mixed. Food inflation was broad-based, and food away from home rose 4.1% y/y, underscoring lingering services pressure. Core services remained uneven, with sharp increases in lodging away from home, airline fares, recreation, and medical care, while shelter continued to cool only gradually. Core goods, however, remained disinflationary, with declines in used cars, communication, and household furnishings helping offset strength elsewhere. Overall, the report points to inflation that is sticky but not re-accelerating as the economy enters 2026.

Markets interpreted the data as supportive of a soft-landing narrative. The dollar weakened and government bond yields fell as the report reinforced the view that inflation pressures remain manageable rather than intensifying. Equities responded positively, with the S&P 500 strengthening as investors leaned into the idea that policy does not need to turn more restrictive, even with inflation still above target.