US equity futures are pointing to a lower open. At 8:30 AM ET, the January Consumer Price Index (CPI) will be published, and the market consensus sees the headline figure falling to 2.9% YoY from 3.4% in December, and the core January figure easing to 3.7% YoY from 3.9% in the prior month. Comments contained in the January PMI data from ISM and S&P Global (SPGI), and the January rebound in oil prices suggest we could see those CPI figures come in higher. Should that be the outcome, they would be the latest figures supporting the Fed taking a more measured approach to beginning a rate-cutting cycle.
Heading into this morning’s report, while the CME FedWatch Tool shows very low prospects for a March rate cut, it continues to reflect the market’s anticipation for 5 rate cuts this year. As the market digests the data found in the January CPI report, it will no doubt turn to comments from Chicago Fed President Austan Goolsbee at 9:30 AM ET this morning and Fed Vice Chair for Supervision Michael Barr at 4 PM ET. It would take a meaningful decline in the core CPI figure on a year-over-year basis for them to soften their stance compared to the Fed’s current playbook. The odds of that happening are not only low, but the likelihood of Goolsbee and Barr breaking from the pack without caucusing with them is even lower.