CPI Awaits: Core YoY Data Predicted to Decline 0.2%

Markets await CPI data. Swap rates and Treasury yields were little changed ahead of tomorrow’s CPI slate, where the Fed will hope for further evidence of slowing inflation. A CPI rebound could force the Fed to delay rate cuts, currently predicted by futures markets to begin in March. Meanwhile, Bitcoin jumped to above $46,500 after the SEC approved Bitcoin ETFs, a positive twist for Bitcoin bulls after yesterday’s false approval. Equities also rallied, as the SPX, DJIA, and NASDAQ climbed .45%-.75% ahead of bank earnings season.

Core CPI YoY expected to decline 0.2%. Though December CPI is expected to be mixed, core YoY CPI is forecasted to decline 0.2% to 3.8%. The move would mark the lowest level since May 2021, a steep drop from the cycle’s peak of 6.6% in September 2022. Core MoM CPI should stay flat at 0.3% (equivalent to 3.66% annualized), which remains above the Fed’s stated long-term goal of 2%.

Houthis launch largest Red Sea missile attack to date. American and British forces shot down 18 Houthi-launched drones and three anti-ship missiles late on Tuesday. The strikes are yet another sign of escalated tensions in the Middle East, a catalyst that could prompt significant retaliation from the US and its allies. The US warned last week that the Houthis would “bear the responsibility of the consequences” if they continued their attacks. Despite the missile launches, oil prices declined on the day, as US crude inventories unexpectedly rose 1.34mm barrels.