What is the distribution of institutional forecasts for the US CPI?

The ranges of estimates are important in terms of market reaction because when the actual data deviates from the expectations, it creates a surprise effect. Another important input in market’s reaction is the distribution of forecasts.

In fact, although we can have a range of estimates, most forecasts might be clustered on the upper bound of the range, so even if the data comes out inside the range of estimates but on the lower bound of the range, it can still create a surprise effect.

These forecasts are produced by investment banks and research firms like Goldman Sachs, Morgan Stanley, JPMorgan, Barclays and so on.

Core CPI Y/Y

• 2.9% (5%)
• 2.8% (28%)
• 2.7% (44%) – consensus
• 2.6% (23%)

Core CPI M/M

• 0.5% (4%)
• 0.4% (26%)
• 0.3% (52%) – consensus
• 0.2% (16%)
• 0.1% (2%)

The market will focus on the Core figures. We can see that there’s quite a wide range of estimates, so any deviation from the consensus should trigger a market reaction. The bigger the deviation, the strongest the reaction will be.

At this point, whatever the data is going to show, the Fed is not going to do anything in January. The question now is whether the Fed is going to cut more or less that the current market pricing of two cuts by the end of the year. Traders are expecting the first cut to come in June once Fed Chair Powell’s term ends, and then another one in December.

We recently got some mixed US data, but in general it’s been leaning towards renewed strength. If the data continues to strengthen, we should get a hawkish repricing, at least to reflect the Fed’s baseline projection of one cut in 2026. Today’s data might not change much in the bigger picture unless we get big deviations from the consensus.

This article was written by Giuseppe Dellamotta at investinglive.com.