CIBC: CPI Number May Be "Sell-The-Rumor-Buy-The-News"

CIBC sees today's CPI release as a potential "sell-the-rumor-buy-the-news type event, given that assets the most impacted (in our view that breakevens and high-beta equities) have already reacted." Their forecasts are in line w market consensus.

• They see "small overshoots" in CPI likely to be tolerated by markets, and "do not believe inflation overshoots will rejiggle rate-hike expectations".
• CIBC writes that with the Fed insisting higher inflation is seen transitory, and the adoption of avg infl targeting making, "overshoots less likely to impact rate expectations".
• On expectations: "taking into consideration that last Friday's payroll data underperformed, it is more likely that the Fed will focus more on the employment number rather than CPI...if anything, because we all know about the base effects in the coming months, underperformance in CPI to expectations will likely garner more market attention – at least over the course of the day. Given that the pullback in yields were not sustained by Friday's weak jobs number, it is unlikely that inflation undershoot will show permanent effects on yields either."