Don’t forget tomorrow’s CPI inflation report for February

Don’t forget tomorrow’s CPI inflation report for February

Tomorrow’s CPI inflation report for February will show whether the Federal Reserve faces a very difficult task in bringing down inflation without crashing the economy (and/or the banking system) or whether the job is simply impossible. Right now economists are pointing toward impossible. The annual inflation rate is likely to have come down in February from January but the month-to-month trend is likely to be flat. Which means that inflation has stopped declining with the annual rate well above the Fed’s 2% target rate.

PCE inflation picks up the pace in January; stocks stumble

PCE inflation picks up the pace in January; stocks stumble

The Personal Consumption Expenditures index, the Federal Reserve’s preferred inflation gauge, rose in January at its fastest pace since June. Consumer prices rose 0.6% from December to January, up sharply from a 0.2% increase from November to December, the Commerce Department reported on Friday, February 24. Year-over-year prices rose at a 5.4% rate, up from a 5.3% annual race in December. Core inflation, which excludes volatile energy and food prices, rose 0.6% from December, up from a 0.4% rise in December from Movember. Year-over-year core inflation was up 4.7% in January, versus a 4.6% year-over-year rate in December.

Financial markets aren’t happy with Fed minutes from February 1 meeting

Financial markets aren’t happy with Fed minutes from February 1 meeting

Minutes from the Federal Reserve’s February 1 meeting show a central bank anticipating Federal Reserve further increases in interest rates in order to bring inflation down to the Fed’s 2% inflation target. “Participants observed that a restrictive policy stance would need to be maintained until the incoming data provided confidence that inflation was on a sustained downward path to 2%, which was likely to take some time,” according to the minutes of the February 1 meeting released today February 22.

Just as Wall Street starts to get comfortable with more 25 basis-point interest rate increases, some on the Fed start talking about a return to 50

Just as Wall Street starts to get comfortable with more 25 basis-point interest rate increases, some on the Fed start talking about a return to 50

The comments come from two of the Federal Reserve’s most hawkish members on the need for higher interest rates to combat inflation, so the remarks aren’t exactly a surprise. Nonetheless, the language does push the envelope on thinking about where the Fed’s interest rate peak for this cycle of interest rate increases might be.

Higher and longer creeps further into Wall Street thinking

Higher and longer creeps further into Wall Street thinking

Stocks didn’t move much today after the Consumer Price Index for January showed enough inflation strength to bring Federal Reserve officials out in force to talk about a potential need to raise interest rates above current financial market expectations. But other indicators–the CME FedWatch Tool, most obviously–showed that investors and traders continue to reposition for more interest rate increases beyond the Fed’s May 3 meeting.

Year-over-year inflation rate drops again, but month-to-month rate shows increase

Year-over-year inflation rate drops again, but month-to-month rate shows increase

On a year-over-year basis headline CPI inflation fell in January. Data released by the Bureau of Labor Statistics this morning, February 14, showed all-in prices rose 6.4% in January 2023 from January 2022. That was a slight drop from the 6.5% year-over-year rate measured in December. (Remember the inflation rate peaked at 9.1% in the summer of 2022.) But on a month-to-month basis, January prices rose 0.5% from December.

PCE inflation picks up the pace in January; stocks stumble

Here’s the latest Wall Street consensus on tomorrow’s CPI inflation report

The consensus is that the headline all-in year-over-year inflation rate will come in at 6.2% for January when the Bureau of Labor Statistics reports the numbers before the New York market open tomorrow February 14. That would be down from an annual 6.5% rate in DecemberGood news for investors and traders hoping that the Fed will end its current cycle of interest rate increase soon (June or July) and with a peak rate of 5.2% or less. The worry remains the month-to-month move in inflation with the consensus looking for a 0.4% increase in the CPI inflation rate in January from December.

Don’t forget tomorrow’s CPI inflation report for February

Saturday Night Quarterback says, For the week ahead expect…

It’s CPI inflation report time again. On Tuesday morning the Bureau of Labor Statistics will report the Consumer Price Index for January. Expectations are for a mixed result with the annual rate continuing to fall from the 6.5% year-over-year headline rate in December for the CPI. But with inflation rising month-over-month for the first time in three months.