January's Consumer Price Index (CPI) to Test Inflation Easing
The January Consumer Price Index (CPI) release, scheduled for Wednesday at 8:30 AM ET, will provide further insights into inflation trends and potential interest rate adjustments by the Federal Reserve in 2025.
Headline Inflation and Core Inflation Estimates:
* Headline inflation is forecasted at 2.9%, matching December's annual gain.
* Core inflation, excluding volatile food and energy costs, is projected to increase by 3.1% year-over-year, the lowest since April 2021 and a decline from December's 3.2%.
Monthly Price Changes:
* Consumer prices are anticipated to rise by 0.3% over the prior month, slightly slower than the 0.4% increase in December.
* Core price increases are expected to reach 0.3%, marginally higher than the 0.2% increase seen in the previous month.
Persistent Core Inflation Drivers:
Core inflation remains elevated due to rising costs for shelter, insurance, and medical care. These trends are likely to continue in January, with core services and used car prices remaining elevated.
Impact of Trump Administration Policies:
The policies of the Trump Administration, including protectionist trade measures, could potentially lead to another inflation resurgence. However, the impact is expected to manifest later in 2025, and analysts note that market-based inflation expectations remain within historical ranges.
Federal Reserve's Stance:
Despite moderating inflation, the Federal Reserve has indicated that interest rates will not be reduced in the near term. This stance is supported by concerns about long-run inflation expectations and the need to ensure that inflation remains within its 2% target.