PRIMER - US January CPI data is due at 13:30GMT/08:30EST

Note: the January consumer price report, originally scheduled for 11th February, was pushed back to 13th February at 08:30EST/13:30GMT because of the partial US government shutdown.

• EXPECTATIONS: The headline is expected to rise +0.3% M/M (prev. 0.3%), and core rising at a rate of 0.3% M/M (prev. 0.2%).
• FED VIEW: While the Fedʼs January statement upgraded its economic assessment by replacing “economic activity has been expanding at a moderate pace” with “expanding at a solid pace”, “job gains have slowed this year” with “job gains have remained low”, and “the unemployment rate has edged up” with it having “shown some signs of stabilisation”, it said “inflation remains somewhat elevated”, relatively unchanged from its prior view that “inflation has moved up since earlier in the year and remains somewhat elevated”. At his post-meeting press conference, Chair Powell said inflation had made limited net progress over the past year, with core PCE showing little improvement. He said most of the overshoot stemmed from goods prices, largely driven by tariffs, which he characterised as a one-off rather than demand-led effect. Powell noted that many tariff effects had already passed through the economy and expects goods and tariff-related inflation to peak around mid-year. Inflation remains somewhat elevated, but recent outcomes have been broadly in line with expectations. He added that short-term market-based inflation expectations have fully retraced, while longer-term measures signal confidence in a return to the Fedʼs 2% target. Powell said incoming data point to clearer improvement in the outlook, adding that confirmation that tariff effects are fading would support policy loosening.
• ANALYST VIEW: Some analysts have recently highlighted Truflationʼs inflation measure, which suggests price pressures are easing. Pantheon Macroeconomics, however, argues that the sharp fall in Truflationʼs daily measure overstates disinflation, noting that it is driven largely by new rents and mortgage interest costs that respond quickly to market shifts, while official CPI uses broader, lagged shelter measures, implying a much more gradual decline. Pantheon sees Truflation as useful for niche components, but not a reliable guide to headline inflation. UBS said easing inflation should keep the Fed on track for rate cuts despite strong jobs data, forecasting two 25bps reductions in June and September, while FOMC projections indicate one additional cut this year. Following the labour report, markets reduced expected easing to about 50bps from 60bps, and now price the first cut in July rather than June.

JPM US Market Intelligence scenario analysis:

JPMorgan’s US Market Intelligence desk said weaker retail sales and high-frequency indicators have increased the importance of the CPI release, adding that a hawkish CPI print is more likely than a dovish outcome, but does not expect a strong market reaction to a stagflationary reading. 

• If Core M/M is above 0.45%: SPX loses 1.25- 2.50%
• If Core M/M is between 0.40-0.45%: SPX could move between -0.75% and +0.25%
• If Core M/M is between 0.35-0.40%: SPX gains 0.25-0.75%
• If Core M/M is between 0.30-0.35%: SPX gains 1.0-1.5%
• If Core M/M is below 0.30%: SPX gains 1.25-1.75%