The closely watched January US CPI report will be released Friday morning. Both headline annual inflation and core CPI are expected to increase by 2.5%. Here’s what to watch and how markets might react.
As markets prepare for Friday’s delayed release of January’s Consumer Price Index (CPI) data, investors are preparing to learn whether inflation is finally calming or whether lingering pressures will persist into the new year.
The report, originally scheduled for earlier in the week but postponed due to the partial government shutdown, follows a surprisingly strong January jobs report, which added 130,000 nonfarm jobs and narrowed the decline to 4.3%.
This strong jobs data has already dampened expectations for aggressive policy, shifting the focus squarely to inflation measures.
A higher-than-expected CPI reading could reinforce the Fed’s cautious stance, potentially putting pressure on the ongoing stock market rally, while a weaker reading could revive hopes for monetary easing and fuel further gains in stocks.
What to expect
Analysts forecast a 0.3% month-over-month rise, which would translate to a 2.5% year-over-year increase, down from December’s 2.7%. This would be the lowest annual rate since May 2025.
Source: Investing.com
which does not take into account volatile food and energy prices, is also expected to rise 0.3% month-on-month, with a slight decline to 2.5% from 2.6%.
The Cleveland Fed’s inflation nowcast puts January at just 0.13% month-over-month and core inflation at 0.22%, pointing to potential downside surprises.
Traders are still betting that the Fed’s next rate cut will come in June, according to the Investing.com Fed Monitor tool. At this point, President Donald Trump’s new Fed chairman, Kevin Warsh, could take charge.
Source: Investing.com
Market implications
Stocks have held near recent highs, but remain vulnerable to CPI surprises. A hot report could trigger a sell-off, particularly in rate-sensitive technology and growth stocks, as expectations of higher and longer rates weigh on valuations.
Source: Investing.com
Safe haven assets will also be in…
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