Tomorrow we get the consumer price index year-over-year for January, with expectations for 7.25%. This would take the CPI to a new high for the cycle, rising from 7% year-over-year from December.
We would like to see the print undershoot and offer several reasons why it may print lower than expected.
First, from a markets expectations basis, the US Treasury market seems to have priced in peak inflation back in November. It would be more confidence inspiring if these series were falling faster, but nevertheless market-based inflation expectations are down for the last three months.
It could be that the peaks in breakeven inflation were a function of a peak in the quarterly employment cost index in September 2021.