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Hawkish CPI Surprise Could Increase Chance Of Median FOMC 2024 Dot Shifting Higher [2/2]

US OUTLOOK/OPINION
  • Details are going to matter here with the wedge between core CPI and the Fed’s preferred core PCE still wide. We see some asymmetrical risk from OER data this month – surprising reliance might be viewed in the lens of a methodological quirk and its smaller weight in PCE, whilst a more concerted moderation might be taken as January’s increase being noise rather than a troublesome new trend.
  • More broadly, the February report should offer a cleaner take on underlying price pressures after potential January seasonality distortions concerning start-of-year price hikes (despite some analysts being cautious about spillover into February).
  • To this end, the extent to which supercore moderates will likely be watched closely after an extremely strong January.
  • Any hawkish surprises here would of course see attention on potential alterations in FOMC communication at the upcoming Mar 19-20 decision.
  • It would only take two of the six participants sitting at the Dec median dot to increase their end-2024 dots to shift the median view to two cuts for the year in a bid to send a hawkish message.

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