Overheating CPI data may raise the FOMC's median year-end interest rate forecast

Analyst Chris Beauchamp said that consensus forecasts show that the overall U.S. CPI monthly rate will rise from 0.3% to 0.4% in February, and the core CPI will fall to 0.3% from 0.4% in January. While these forecasts point to higher inflation than policymakers expect, they may suggest that underlying inflationary pressures have not worsened. However, significant deviations from consensus, especially upward, could disrupt markets and lead to a reassessment of the Fed's policy outlook. An increase in CPI in February could significantly increase the likelihood that the median 2024 rate cut in the Federal Reserve's FOMC March economic forecast will show a 50 basis point rate cut this year, rather than the 75 basis point currently forecast. In addition, financial markets usually react sensitively to CPI data, with the SP 500 often falling after higher-than-expected data is released, while the U.S. dollar usually strengthens. Over the past six months, the SP 500 index has fluctuated on average +/-0.8% on the day CPI was released, the highest level since April last year.