Analysis: January CPI Expected to Continue Cooling Trend, Fed Likely to Remain on Hold in the Short Term

February 13 — The U.S. Bureau of Labor Statistics (BLS) will release January’s Consumer Price Index (CPI) data this Friday evening at 9:30 PM Beijing time. Market forecasts call for headline CPI to rise 2.5% year-over-year in January, down from the prior reading of 2.7%. Core CPI (excluding food and energy) is also expected to fall to 2.5% year-over-year, while its month-over-month growth could edge up to 0.3%. If the data meets expectations, headline inflation will drop to its lowest level since May 2023 — continuing the downward trend from last September’s peak. Analysts note slower housing cost growth may weigh on service prices, but tariff pass-through, initial price hikes by businesses early this year, and travel-related subcategory costs could still support inflation. RBC projects core CPI will rise 0.4% month-over-month — above market consensus. While inflation may cool further, markets broadly believe the data is unlikely to shift the Federal Reserve’s current “wait-and-see” stance. CME Group’s FedWatch Tool shows the probability of the Fed holding rates steady at least through July is relatively high. Economists point out that amid fiscal expansion and the Fed’s three prior rate cuts, policymakers are focused on the sustainability of inflation’s decline and labor market performance. The federal funds rate currently sits in a 3.5%-3.75% target range. Some institutions argue even if inflation falls to 2.5%, it remains within a “normal range,” but the policy path is unlikely to see significant short-term adjustments based on single-month data.