Every time it is said that CPI is very important, so what exactly is important about it this time?
Nick Timiraos, a Wall Street Journal reporter known as the 'mouthpiece of the Federal Reserve,' pointed out that not all monthly CPI inflation reports are equally important. In an economy facing price pressures, the January CPI data has a greater impact. In recent years, the price increases in the U.S. in January have been exceptionally strong, reflecting a significant adjustment in prices at the beginning of the year.
Despite the recent escalation of tensions in international trade, traditional financial markets remain stable and show no signs of panic. Credit yields are at cycle lows, and the VIX index is stable around 16, indicating that the market is prepared for negative news.
Last night's testimony from Old Powell next door also reinforced the market's 'wait-and-see' attitude, suggesting that the pace of interest rate cuts may slow down. However, the market did not show volatility, so will Old Powell's speech tonight lead to a big drop like in December?
I believe tonight's CPI data should meet expectations, increasing the probability that the Federal Reserve will keep interest rates unchanged. Old Powell's speech is also unlikely to have much impact and will be similar to last night's remarks.