Will CPI Data Signal Sustained Inflation, Jeopardizing a June Fed Rate Cut?

James Hyerczyk
Updated: Mar 12, 2024, 12:24 UTC

Key Points:

  • February CPI may show inflation spike, led by rising gasoline prices.
  • Expected CPI rise indicates deviation from last year’s cooling trend.
  • Fed's response to CPI data critical for 2024 rate cut strategy.
US CPI Report

Anticipating CPI Data – Inflation Worries on the Radar

This week, financial market traders are buzzing with anticipation for the February 2023 Consumer Price Index (CPI) report, due to be released at 12:30 GMT. The forecast? A spike in inflation, partly driven by climbing gasoline prices. Traders are on high alert, knowing this report could be a game-changer for the Fed’s next move and the stock market’s direction.

Analyzing CPI: Expectations of Persistent Inflation

As we count down to the CPI release, the consensus is clear: inflation isn’t backing down, especially when you strip out the unpredictable swings of gasoline. Economists are eyeing a 0.4% uptick in monthly inflation, slightly edging up from January’s 0.3%. This gradual climb suggests we’re veering off the path of last year’s cooling inflation trend. Even the core CPI (minus the food and energy noise) tells a similar story, projected to rise by 0.3% monthly, keeping up a year-on-year increase of 3.7%.

Fed Policy: Steering Through Inflation’s Choppy Waters

All eyes are on the Fed’s next move. The February CPI could really turn up the heat, but that doesn’t mean we’re off the path to potential rate cuts in 2024. Yes, we’ve got persistent inflation, but it’s not completely derailing the Fed’s target track. However, it’s not a straight run either. The Fed’s got to tread carefully, balancing immediate reactions with their long-term strategy. The bond market’s already betting on up to four cuts this year, but the Fed’s stance remains a tightrope walk.

Stock Market Impact: CPI as a Market Mover

For the stock market, the CPI report is more than just numbers – it’s a major market mover. The market’s been recalibrating, with traders wary of lingering inflation and the Fed’s counteraction. A report confirming stubborn inflation could rattle the markets, bringing back worries of delayed rate cuts and pressuring the bullish run. On the other hand, if the report suggests inflation’s aligning with Fed targets, that could boost investor confidence and keep the bull market running.

CPI Report – A Critical Market Indicator

Summing up, the February 2023 CPI report is a big deal. It’s not just about the inflation numbers; it’s about how these numbers could sway Fed policy and, in turn, shake up the stock market. As we gear up for the release, traders are keeping a close watch, ready to decipher what this means for our ongoing battle with inflation and the broader economic outlook.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

Did you find this article useful?