January CPI Preview

The January CPI report should provide a cleaner reading of price developments as compared to the prior two, which included distortions from the October/November government shutdown. Although this CPI is delayed due to the most recent mini-shutdown, data collection was not inhibited. We estimate that core CPI will rise 0.31% for January, which would bring the y/y rate to 2.5%. We expect core goods prices to normalize after a curiously low (flat) reading in December. Core goods price growth has generally been higher since “Liberation Day” and we think a reversion to that trend is likely. Despite higher than usual goods prices, more subdued shelter costs have helped to offset the overall impact. Going forward, we expect easier financial conditions, a positive fiscal impulse, and a solid economic foundation to keep a floor under growth, preventing further disinflation in the coming months.