MNI US CPI Preview: Core CPI Seen Holding Jan Pace After Historical Rally

EXECUTIVE SUMMARY:

• Core CPI inflation is seen holding a 0.4% M/M clip for the third month running in February.
• It is however expected to have been boosted by a bounce in used car prices rather than more broad-based pressure, especially in light of a sizeable easing in supply chain pressures.
• Core non-housing services will again be in focus after moderating to a mixed extent in January, whilst OER and primary rents inflation are seen slowing slightly further.
• Powell had last week opened the door to a 50bp hike at the March FOMC, arguably dented after Friday’s payrolls report showed softer wage pressures despite continued surprise strength for payrolls growth. That already seems like a long time ago: a historical fixed income rally on regional bank contagion fears now sees only one more 25bp hike for the cycle priced, after a 100bp drop in 2Y Tsy yields in three days.
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