CPI report preview: Inflation overall likely slowed again in November

That could have helped push up “supercore” inflation – a key measure of services prices that excludes housing and that the Fed is particularly scrutinizing – to 0.39% from 0.25% the previous month, Barclays says. Markets would also love to see inflation data that helps coax officials to speed up anticipated interest rate cuts in its forecast for next year. The prospect of accelerated rate cuts – which typically make stocks more attractive than bonds — already has sparked a torrid market rally the past six weeks. Investors are hoping that a second straight tame report on the consumer price index (CPI) will increase the Fed’s comfort level with holding rates steady after a two-day meeting Wednesday – an outcome that’s virtually certain. CPI is an important tool that aims to illustrate the changes in cost of goods and services over time.

1. However, the question remains as to when and if inflation will return to the Fed’s 2% target, and when the Fed may consider inflation sufficiently close to target levels that it is willing to ease back on interest rates.
2. Automated retrieval programs (commonly called “robots” or “bots”) can cause delays and interfere with other customers’ timely access to information.
3. Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation.
4. The BLS is committed to providing data promptly and according to established schedules.
5. The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time.

The Cleveland Fed is part of the Federal Reserve, the central bank of the United States. With offices in Cleveland, Cincinnati, and Pittsburgh, we serve an area that comprises Ohio, western Pennsylvania, eastern Kentucky, and the northern panhandle of West Virginia. The goal of our work is to strengthen the economic performance of the nation and our region. The Cleveland Fed’s Center for Inflation Research is the hub for “all things inflation,” providing a combination of research, analyses and data, background and commentary, and an annual conference series dedicated to inflation. In addition, high month-on-month inflation from June 2022 rolling out of the 12-month series the following month, may enable that month’s inflation reading may trend lower still.

In his semi-annual testimony before the US Congress, Federal Reserve Chairman Jerome Powell said that the economic outlook was uncertain and that the ongoing progress toward the 2% inflation goal was not assured. Upcoming CPI inflation figures may show there is still more work to do for the Fed to fight inflation, even if it’s falling from peak levels. However, the Fed is now considering holding rates at high levels, rather than raising rates to achieve its goal. Sign up for our monthly newsletter to get the latest research, expert interviews, and upcoming events from the Cleveland Fed.

February’s core CPI, which excludes volatile food and energy prices, is expected to increase 3.7% annually and 0.3% on a monthly basis. This key economic metric is based on prices that consumers pay for goods and services throughout https://www.topforexnews.org/news/the-10-best-trading-books-of-all-time/ the U.S. economy. The percentage change in CPI over a period of time is referred to as the inflation rate. This chart shows the model’s estimates of the inflation risk premium, the real risk premium, and the real interest rate.

Market reaction to US CPI data

The CPI reports have had shelter costs rising at over 8% year-on-year recently, but industry data from Redfin RDFN suggests that median U.S. home prices may be falling year on year. The reason for the disconnect is that the CPI uses a series of panels to calculate housing costs, which can add a lag to the data of at least 6 months at turning points in the cycle, just as we may be seeing now. However, after this upcoming CPI reading, things may improve on the most recent nowcast analysis. May’s monthly increase close option overview is forecast at 0.3%, and that, compared with sharply rising prices from May 2022 falling out of the series could finally bring annual CPI below 5% for the first time since 2021. The November CPI report is expected to show that consumer prices were roughly flat on a monthly basis for a second straight month, lowering the annual gain to 3.1%, according to Barclays and Nomura. The drop likely was driven by another decline in gasoline prices and a modest uptick in food costs, the two research firms say.

The Consumer Price Index (CPI) measures the change in prices of a basket of goods and services over a period of time. It is usually expressed as a percentage https://www.day-trading.info/valbury-capital-review-2020/ change on a month-on-month (MoM) and year-on-year (YoY) basis. Core CPI is the figure targeted by central banks as it excludes volatile food and fuel inputs.

How CPI Affects You

For the record, the CPI report is released monthly by the Bureau of Labor Statistics, based on price data collected over the course of the month. “When is the next CPI report?” was a question no one was asking back in the days of 2% inflation readings. The table below shows the percentage change of US Dollar (USD) against listed major currencies today. He has previously served as Chief Investment Officer at Moola and FutureAdvisor, both are consumer investment startups that were subsequently acquired by S&P 500 firms. He has published two books and is a CFA Charterholder and educated at Oxford and Northwestern. The Fed won’t meet again to set interest rates until May 3, so the March inflation numbers won’t be decisive in informing its view.

While Tuesday’s CPI report is likely to show that overall inflation drifted down further in November, an underlying measure that the Fed watches more closely likely ticked up again, economists say. That probably wouldn’t spur the Fed to raise rates but it could lead officials to at least keep that option open and push back on the idea that rate cuts will be moved up, forecasters say. An Atlanta Fed measure of “sticky price” inflation held at 4.6% on a 12-month basis in January. The gauge is weighted toward items such as housing and insurance, and Fed officials are hoping that shelter costs decrease through the year, taking some pressure off the cost of living gauges. Though it has fallen sharply since its peak in mid-2022, inflation’s resilience almost certainly will assure no Fed rate cuts at its next meeting March 19-20, and possibly into the summer, according to current market pricing.

Other economic reports last week could also affect the Fed’s outlook Wednesday. Consumer inflation expectations fell sharply this month, which should help keep prices in check. And the job market generally continued to cool in November, though the unemployment rate declined. The upcoming CPI release may continue to reinforce the narrative that inflation is not falling as fast as many would hope. However, even if that’s the case there’s a chance that subsequent readings are more encouraging, either due to price hikes from 2022 falling out of the 12-month series or home prices easing in the CPI’s data set. Either way there’s lot of important economic data to come before the Fed meets again on June 13-14.

Markets were rattled in January when the CPI data came in higher than expected, and Fed officials shifted their rhetoric afterward to a more cautious tone about easing policy. Information about food and energy price increases are both summarized in the beginning of the report, since these two categories directly impact consumers. Core inflation, which refers to inflation minus food and energy prices, comes next. The monthly CPI report starts with a summary of the findings, including how much inflation either increased or decreased for the month prior, followed by the average change in prices over the past 12 months. Markets desperately want the Fed to stop raising interest rates – and especially look forward to a time when the central bank pivots to rate cuts – but that won’t happen until after inflation is under control.

What is the impact of inflation on foreign exchange?

Next week in the US, we’ll see the Fed’s favoured measure of inflation, the core PCE deflator. Here, we expect to see a few signs of weakness in real consumer spending. Although it may seem counter-intuitive, high inflation in a country pushes up the value of its currency and vice versa for lower inflation. This is because the central bank will normally raise interest rates to combat the higher inflation, which attract more global capital inflows from investors looking for a lucrative place to park their money.

Annual Core CPI, which excludes volatile food and energy prices, increased 3.8% in the same period, below the January increase of 3.9% but above the market forecast of 3.7%. Economists expect that prices across a broad spectrum of goods and services rose 0.4% on the month, just ahead of the January pace for 0.3%, according to the Dow Jones consensus. Excluding food and energy, the increase for core inflation is forecast at a 0.3% gain, also one-tenth of a percentage point above the previous month. The CPI report is broken down into many subcategories, but the two main ones you’ll hear most about on CPI day are headline CPI and core CPI. Core CPI excludes volatile food and energy prices, and is considered to be a better predictor of future inflation. The data are expressed as percent changes, and are measured both month-to-month and year-over-year.

A key inflation reading is due out Tuesday morning. Here’s what to expect

Shelter costs make up a majority of the CPI’s importance weighting in calculating U.S. price trends, so if shelter costs start to move down, that could well bring down the overall inflation reading. Should that happen it may create a path for inflation to return to the Fed’s 2% target and potentially enable the Fed to reconsider the path for interest rates. The monthly CPI report includes inflation rates for various goods and services, as well as the rate of inflation in various regions across the United States. The inflation data will certainly influence what the central bank decides to do at the next Fed meeting. The FOMC left interest rates unchanged when it last met, and isn’t expected to start cutting until its June meeting.