- The closely watched US January CPI report comes out on Friday morning.
- Headline annual inflation and core CPI are both seen rising 2.5%.
- Here’s what to watch and how markets could react.
As markets gear up for the delayed release of the January Consumer Price Index () data on Friday, investors are bracing for insights into whether inflation is finally cooling or if persistent pressures will linger into the new year.
The report, originally slated for earlier in the week but postponed due to the partial government shutdown, comes on the heels of a surprisingly strong January jobs report that added 130,000 nonfarm payrolls and ticked the down to 4.3%.
This robust labor data has already tempered expectations for aggressive , shifting focus squarely to inflation metrics.
A hotter-than-expected CPI print could reinforce the Fed’s cautious stance, potentially pressuring the ongoing stock market rally, while a softer reading might reignite hopes for monetary easing and fuel further gains in equities.
What to Expect
Analysts predict a 0.3% month-over-month rise in , translating to a 2.5% year-over-year increase, down from December’s 2.7% reading. This would mark the lowest annual rate since May 2025.
Source: Investing.com
, which strips out volatile food and energy prices, is also projected to climb 0.3% monthly, with the easing slightly to 2.5% from 2.6%.
The Cleveland Fed’s inflation nowcast estimates January at just 0.13% month-over-month and core at 0.22%, suggesting potential downside surprises.
Traders are still betting that the next Fed rate cut would be in June, according to the Investing.com Fed Monitor tool. By that point, President Donald Trump’s newly nominated Fed chair, Kevin Warsh, could be in charge.
Source: Investing.com
Market Implications
Equities have held near their recent record highs, but the S&P 500 remains vulnerable to CPI surprises. A hot report could spark a sell-off, particularly in rate-sensitive tech and growth stocks, as higher-for-longer rate expectations dent valuations.
Source: Investing.com
Safe-haven assets will also be in focus. , traditionally a refuge in times of inflationary uncertainty, could see prices climb back towards their recent record above $5,500 per ounce if the CPI report indicates persistent price pressures.
Source: Investing.com
Elsewhere, in the bond market, a strong inflation print could push the 10-year yield towards 4.5% (vs. 4.1% pre-CPI). A mild CPI report might reverse this, dragging yields below 4.0% and reviving demand for rate-sensitive bonds.
Bottom Line
In short, Friday’s January CPI release isn’t just another data point; it’s a key input into the Fed’s rate‑cut calculus and a potential inflection point for risk assets. A cooperative number keeps the soft‑landing, gradual‑cut story intact. A hotter‑than‑expected print could reset those expectations quickly.
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Disclosure: This is not financial advice. Always conduct your own research.
At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR® S&P 500 ETF, and the Invesco QQQ Trust ETF. I am also long on the Technology Select Sector SPDR ETF. I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies’ financials.
The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.
Follow Jesse Cohen on X/Twitter @JesseCohenInv for more stock market analysis and insight.