目前市场普遍预计，1月份：Given the rebound in Energy prices, the surge in prices of several major food items such as eggs, and the tendency for January data to often exceed Wall Street expectations in recent years, some analysts believe that this January's CPI data will be hotter than the market anticipates. Additionally, Powell will attend a hearing in the House of Representatives tonight, and he stated earlier that there is no need to rush to cut interest rates, indicating that tonight's market is bound to be turbulent.
As the labor market in the USA cools and stabilizes, Powell's tough remarks overnight make tonight's CPI data to be released at 21:30 very important.
Despite the Federal Reserve claiming that "inflation is controllable", the core inflation rate has remained stubbornly above 3%. Currently, as Trump's tariff policies gradually take effect, combined with the rebound in energy and major food prices, the market is holding its breath for any signs of "overheating" inflation.
At present, the market generally expects that in January:
CPI will grow by 0.3% month-on-month, slightly lower than last month's increase of 0.4%;
CPI will rise by 2.9% year-on-year, unchanged from last month, reaching a five-month high;
Core CPI will rise by 0.3% month-on-month, higher than last month's 0.2%. Goldman Sachs' forecast is slightly above market expectations, with core CPI rising by 0.34% month-on-month and 3.19% year-on-year;
Core CPI will rise by 3.1% year-on-year, slightly lower than last month's 3.2%.
It is worth noting that January's CPI will also incorporate two annual updates, including adjustments for seasonal factors and weight adjustments, which may have a potential impact on the data. Goldman Sachs expects that the monthly inflation rate for CPI in the coming months will be around 0.25%, and by December 2025, the year-on-year core CPI inflation rate will be about 2.8%, while the core PCE inflation rate will be 2.6%.
Tonight at 23:00, Powell will testify on monetary policy before the House Financial Services Committee, which may provide more clues about the monetary policy direction for this year. Overnight, Powell stated at the Senate hearing that the economy remains strong, and the Fed hopes to continue making progress in lowering inflation, with no reason to rush into rate cuts, while the policy is prepared to deal with risks and uncertainties; the labor market is not a significant source of inflationary pressure.
January CPI may have a "hot" surprise.
Given the rebound in energy prices in January, the surge in prices of several key food items such as eggs, and the tendency for January data to often exceed Wall Street expectations in recent years, some analysts believe that this January's CPI data will be hotter than the market anticipates.
Goldman Sachs' forecast is slightly higher than the general market expectation, predicting an overall CPI increase of 0.36% month-on-month, and a year-on-year increase of 2.96%; January's core CPI is expected to rise 0.34% month-on-month and 3.19% year-on-year.
Although last month's CPI report was below expectations, analysts believe that the possibility of January's CPI declining for two consecutive months is low. The rebound in energy prices, rising prices of major food items (such as eggs), the wealth effect brought by the stock market rise, and the high correlation between CPI and the ISM services price index all suggest a potential for a more significant increase in inflation.
Historical data shows that CPI data for January often exceeds expectations. Although Goldman Sachs believes that due to the easing price pressures over the past year and seasonal factors being factored into the large increase expected in January, this year's "January effect" may weaken, the risk of inflation remains.
Other drivers of inflation: Autos, Insurance, and Communications.
The Goldman Sachs Jan Hatzius team pointed out in the report on the 10th that three major components may dominate the January CPI trend:
Auto prices: Used car prices are expected to increase by 1.5% (previously 1.2%), and new car prices are expected to grow by 0.5% month-on-month, mainly due to a reduction in dealer promotions (incentives fell by 12% month-on-month in January).
Auto Insurance: The rate of increase in premiums may expand from 0.4% to 0.75%, reflecting the lagging pressures from repair costs and litigation expenses. Goldman Sachs warns that the premium increase may further widen in February.
Communications services: Affected by postal rate adjustments and seasonal adjustments, the communications component may reverse its deflationary trend, expected to grow 0.5% month-on-month (previously flat).
Furthermore, Goldman Sachs expects that airfares inflation will slow down this month, and housing rents (including owner's equivalent rent and actual rent) will also ease slightly. The monthly inflation rate for CPI will be around 0.25% in the coming months. By December 2025, the year-on-year inflation rate for core CPI is about 2.8%, and the core PCE inflation rate is 2.6%.
It is worth noting that this CPI report will introduce two key adjustments. First, the seasonal Indicators will be updated. Goldman Sachs points out that based on the price fluctuation data for 2024, the revision may weaken last year's core inflation's "abnormal seasonal fluctuations." Historical Data shows that the first annual revision typically offsets 20% of monthly data deviations.
Second, the Consumer weight adjustment will use the 2023 consumer expenditure survey data. However, Goldman Sachs believes that due to the structural changes in consumption that occurred in 2022, this adjustment has limited impact on the individual weights.
The market is on high alert.
If the CPI exceeds expectations, it will inevitably compress the subsequent interest rate cut space for the Federal Reserve, putting pressure on the US stock market, and the dollar may remain strong.
Regardless of whether the January CPI data "explodes," the market has entered a phase of high volatility. The implied volatility of S&P 500 Index Options shows that the market expects a significant fluctuation of 1.3% after tonight's CPI announcement, which is the largest implied volatility before a CPI announcement since the regional bank crisis in 2023.
Another point to note is that tonight's CPI is crucial for the US Bonds market. According to Goldman Sachs Analyst Paolo Schiavone's warning, the results of the CPI data will unlock the debate between bull and bear markets in the bond market.
If a bull market occurs, potential driving factors include the issuance of BESENT bonds, DOGE, and relaxed regulatory measures; while the bear market will focus on rising inflation pressures, future issuance schedules, and changes in Japan's demand for fixed income products.
Following Powell's statement that the Federal Reserve does not need to rush into interest rate cuts, US bond yields rose across the board, with the 10-year US bond yield increasing by 4 basis points to nearly 4.55%. The swap market currently expects that the remaining rate cuts in this policy cycle will be less than two cuts of 25 basis points each.
In addition, the US government will issue approximately 67 billion dollars of 10-year and 30-year Bonds on Wednesday and Thursday, respectively, which will also impact the market.
It is worth noting that last month's slightly easing inflation data had driven a rebound in US Bonds. However, more and more investors and Consumers are concerned that Trump's tariff policy and the escalating Trade tensions will worsen inflation in the coming months, which may limit the rebound potential of the Bonds market.
Editor/ping
