When’s The January CPI Report And What To Expect From It

The Consumer Price Infex (CPI) will be released on at 8.30am ET on Thursday January 12, 2023 giving details on the inflation picture for the month of December. Over recent months inflation in the U.S. has fallen from peak levels, helped by declining energy costs, but the U.S. Federal Reserve (Fed) remains concerned that inflation in services is not falling fast enough due to higher wage costs.

Nowcasts

Nowcasts of inflation from the Cleveland Fed, estimate December CPI inflation at 0.1% at the time of writing. That would take annual inflation down to the mid 6% range.

However, core inflation, which strips out food and energy, and is a metric the Fed prefers to look at, may come in hotter at 0.5% on the nowcast estimates. That rate of core inflation would concern the Fed as it would translate to over 6% annualized inflation. Nowcasts analyze current publicly available prices to determine what the inflation measure will be before the CPI reports the data.

Fed Reaction

The Fed appears set to raise rates again in February, but by a smaller amount than we saw for much of 2022. The markets estimate that the Fed will most likely raise rates 0.25 percentage points. However, if the inflation report and other data-points are not encouraging, then the Fed may lean to upping rates 0.5 percentage points.

The Fed sees that inflation is falling, but is concerned that services inflation is remains too high based on wage pressures. As such, the Fed will be looking at services inflation within the CPI inflation numbers especially closely. The Fed believes that goods inflation and housing costs will likely trend lower in 2023, but they are concerned that services costs will continue to rise if the job market remains relatively hot.

Other Inflation Data

The CPI report provides important insight on how prices are trending, but it will be complemented by other inflation readings. The release of the Producer Price Index (PPI) will show how wholesale prices are trending. The PPI report for December will be released on January 18, 2023.

In addition, the Personal Consumption Expenditures Price Index (PCE Inflation) which is the Fed’s preferred inflation metric, will be released on January 27, 2023. CPI inflation tends to receive relatively more attention because it is the first release and PCE inflation is often broadly similar.

What To Expect

The January CPI inflation report is expected to provide more data that inflation is trending lower. However, annual inflation will remain relatively high, which is a concern to the Fed. Service inflation will be closely watched for signs of where inflation rates may settle in 2023. The CPI report may provide more evidence that inflation is coming down, but not as quickly as the Fed wants. That’s why February may see another rate hike from the Fed.