CPI Preview: Acceleration Seen In Feb (1/2)

U.S. CPI (released 0830ET) is expected to have risen 0.4% M/M in February following a 0.3% increase in January, per BBG survey.

• Excluding food and energy, CPI is forecast to increase 0.2% after a flat reading in Jan. Meanwhile, annual inflation rose by 1.4% in Jan and markets look for an acceleration to 1.7% in Feb.
• Survey evidence is in line with an uptick of inflation. The Feb IHS composite PMI noted an increase in output charges, which was the second steepest on record.

The Feb reading is a prelude to the pandemic-related base effect months starting in March that will likely see much higher prints. But it still carries importance, as BMO FICC argues:

• " core-CPI will have a meaningful impact on how willing the market is to price in a discount for the reopening....this will be the final read before the base effects come into play and policymakers are sure to emphasize the 3-mo annualized rate over the yearly pace... As we look ahead to the pandemic influenced inflation figures on the horizon, February's monthly move will be meaningful in establishing the departure point for the Fed's favored quarterly pace. Said differently, another disappointment will challenge the accelerating consumer price narrative just as the year-over-year figures offer their greatest potential shock value."