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BofA: Last Year’s CPI Revisions To 4Q An Outlier

US OUTLOOK/OPINION
  • BofA write that Friday's CPI revisions have been flagged by Fed Gov. Waller after last year’s strength, but “while revisions are still unknown, we do not expect a repeat of last year.”
  • Revisions our typically small in nature: “Over our ten-year sample, the absolute average of the monthly revision was just 2.6bps. Meanwhile, last year's revisions to the monthly profile in 4Q 2022 were by far the largest in our sample. On average, 4Q 2022 was revised up by 9bps. The average revision to 4Q in the remaining nine years was -0.2bps. In our view, this suggests last year was an outlier.”
  • “Moreover, the revisions were driven primarily to revisions to new and used autos, which were likely a result of methodology changes more than changing seasonal patterns.”
  • “Since we expect this year's revisions to be relatively benign, we do not think they will affect the outlook for monetary policy. We continue to think the Fed will start its cutting cycle with a 25bp cut in March owing in large part to progress on inflation. While revisions are unlikely to affect our outlook for monetary policy, the incoming data might” with two more CPI prints and employment reports before the March FOMC.
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