US Inflation Data Under the Microscope As Markets Test Post-Shutdown Signal
- Headline, core CPI seen steady at 2.7% y/y in December - Residual measurement issues could still mess with ‘cleaner’ print - Soft November inflation keeps 2026 Fed easing on the table - Data scheduled for release at 08:30 ET/13:30 GMT
Distortions to key US data stemming from the autumn government shutdown are still being felt, according to analysts. As such, Wednesday’s inflation report from the Bureau of Labor Statistics will be closely watched for signs that reporting has normalised.
Economists said they expect headline CPI to hold steady at 2.7% y/y in December, with the monthly measure forecast to rise 0.3%. Core CPI is also seen at 2.7% y/y, a tenth firmer than November’s reading.
Analysts at Citi said December’s CPI should look more typical, although some residual measurement issues may persist. The bank noted that the monthly print could be lifted by firmer goods prices, partly reflecting distortions in November. “We will pay close attention to shelter inflation, which should continue to be soft,” Citi said. “Other services prices should also generally ease, apart from airfares, which are likely to be strong given seasonal patterns.”
November’s outturn surprised sharply to the downside, undershooting the 3.1% consensus forecast. Core CPI similarly printed at its lowest level in almost five years.
Reacting to the data at the time, Deutsche Bank said the report was significant as it kept open the prospect of further Federal Reserve rate cuts in 2026.
Challenging times for monetary policy
At its December meeting, the Federal Reserve lowered the federal funds rate by 25 basis points to a target range of 3.50–3.75%.
The updated dot plot pencilled in one additional rate cut in 2026, followed by another in 2027, with the neutral rate projected at around 3.4% by end-2026 and 3.1% by end-2027.
Speaking at the post-meeting press conference, Fed Chair Jerome Powell described the current environment as “challenging,” citing upside inflation risks alongside downside risks to employment, and said there was no “risk-free path” for monetary policy.
Separately, Minneapolis Fed President Neel Kashkari told CNBC this week that his best guess was that policy was “pretty close to neutral right now.”
“We just need more data to see which force is stronger — inflation or the labour market,” Kashkari said. “Then we can move from a neutral stance in whatever direction is necessary.”
Tuesday’s CPI release, alongside Wednesday’s PPI data, may go some way toward filling in the remaining pieces of the Fed’s policy puzzle.
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- Headline, core CPI seen steady at 2.7% y/y in December
- Residual measurement issues could still mess with ‘cleaner’ print
- Soft November inflation keeps 2026 Fed easing on the table
- Data scheduled for release at 08:30 ET/13:30 GMT
By Harry Daniels
LiveSquawk News
@HarryDaniels71
13 January 2026 | 11:30 GMT
Distortions to key US data stemming from the autumn government shutdown are still being felt, according to analysts. As such, Wednesday’s inflation report from the Bureau of Labor Statistics will be closely watched for signs that reporting has normalised.
Economists said they expect headline CPI to hold steady at 2.7% y/y in December, with the monthly measure forecast to rise 0.3%. Core CPI is also seen at 2.7% y/y, a tenth firmer than November’s reading.
Analysts at Citi said December’s CPI should look more typical, although some residual measurement issues may persist. The bank noted that the monthly print could be lifted by firmer goods prices, partly reflecting distortions in November. “We will pay close attention to shelter inflation, which should continue to be soft,” Citi said. “Other services prices should also generally ease, apart from airfares, which are likely to be strong given seasonal patterns.”
November’s outturn surprised sharply to the downside, undershooting the 3.1% consensus forecast. Core CPI similarly printed at its lowest level in almost five years.
Reacting to the data at the time, Deutsche Bank said the report was significant as it kept open the prospect of further Federal Reserve rate cuts in 2026.
At its December meeting, the Federal Reserve lowered the federal funds rate by 25 basis points to a target range of 3.50–3.75%.
The updated dot plot pencilled in one additional rate cut in 2026, followed by another in 2027, with the neutral rate projected at around 3.4% by end-2026 and 3.1% by end-2027.
Speaking at the post-meeting press conference, Fed Chair Jerome Powell described the current environment as “challenging,” citing upside inflation risks alongside downside risks to employment, and said there was no “risk-free path” for monetary policy.
Separately, Minneapolis Fed President Neel Kashkari told CNBC this week that his best guess was that policy was “pretty close to neutral right now.”
“We just need more data to see which force is stronger — inflation or the labour market,” Kashkari said. “Then we can move from a neutral stance in whatever direction is necessary.”
Tuesday’s CPI release, alongside Wednesday’s PPI data, may go some way toward filling in the remaining pieces of the Fed’s policy puzzle.