We will have U.S. consumer inflation data later today, Tuesday, February 13, 2024.
Let’s take a look at the range of expected values compared to the consensus median values (“expected values” in the screenshot above) for key data points.
January CPI headline year-over-year, expected 2.9%, ranges are:
January CPI headline m/m is expected to be 0.2%, with ranges as follows:
Core inflation (CPI) excluding food and energy is expected to be 3.7% year-over-year in January, with ranges as follows:
January CPI (core inflation) excluding food and energy is expected to be 0.3% month-on-month, with the following ranges:
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While you are here, JP Morgan says:
- We expect the headline CPI to rise 0.1% and the core index to rise 0.22% in January, both below consensus expectations and market prices.
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Why is knowledge of this range important?
Data results that deviate from the market’s low or high expectations tend to move the market more significantly for several reasons.
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Surprise factor: Markets often price expectations based on forecasts and previous trends. If the data deviates significantly from these expectations, unexpected effects will occur. This can lead to a rapid revaluation of assets as investors and traders revalue their positions based on new information.
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Psychological influences: Investors and traders are influenced by psychological factors. Extreme data points can evoke strong emotional reactions and lead to overreactions in the market. This can potentially magnify market movements, especially in the short term.
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Reassess risk: Unexpected data can lead to reassessment of risk. If the data is significantly lower or higher than expected, the perceived risk of a particular investment may change. For example, if economic indicators outperform expectations, the perceived risk of investing in stocks can be reduced, leading to market gains.
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Automated trading triggers: In today’s markets, the majority of trading is done by algorithms. These automated systems often have preset conditions and thresholds that, if triggered by unexpected data, can lead to large-scale buys and sells.
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Implications for monetary and fiscal policy: Data that deviate significantly from expectations can influence central bank and government policy. For example, today’s weaker-than-expected inflation data will raise expectations that a Federal Open Market Committee (FOMC) rate cut will be closer and larger. Dew. A stronger (i.e. higher) CPI report would diminish such expectations.
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Liquidity and Market Depth: In some cases, extreme data points can impact market liquidity. If the data is sufficiently unexpected, it can create a temporary imbalance between buyers and sellers, causing large market movements until a new equilibrium is found.
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Chain Reactions and Correlation: Financial markets are interconnected. If unexpected data causes a large movement in one market or asset class, it can cause correlated movements in other markets, amplifying the impact on the overall market.
