January data brought a major upside CPI surprise and a downside miss in retail sales.
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- Sequential price pressures in the January CPI report exceeded all expectations, but the hawkish impact was blunted 24 hours later by relatively benign PPI details.
- The week ended with a notably soft retail sales report, one that means that Q1 2025 goods PCE growth will have to be reconsidered to the downside absent a big reversal to the upside in February and/or revisions.
- In other net dovish releases, the NY Fed consumer survey saw inflation expectations bely the sharp climb in the partisan-disrupted U.Mich equivalent the week prior whilst manufacturing production disappointed.
- President Trump has also announced plans to announce reciprocal tariffs but details were lacking and the Commerce Department is due to report on a plan in April.
- Fed Funds implied rates are ending the week at lows, with 41bp of cuts priced for 2025 vs 26bp post-CPI.
- The coming week’s data schedule is relatively light, due in part to Monday’s federal government holiday.
- Aside from the weekly jobless claims release, data points include preliminary February PMIs, regional Fed manufacturing surveys, various housing indicators, and the final UMichigan consumer survey (eyed for any revision of strong 4.3% 1-year inflation expectations).
- Otherwise, the week will be mainly given over to Fed communications, including the January FOMC meeting minutes. Among the speakers, we will be most interested to hear Gov Waller’s take on the latest data, as he has been one of the more dovish members of late, and St Louis’s Musalem – a hawk and 2025 FOMC voter - who hasn’t discussed his monetary outlook since the January meeting.
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