February CPI preview: expecting additional YoY deceleration, but the MoM number risks further unnerving markets

While bank failures continue to garner the lion’s share of headlines, the next US CPI report is around the corner.

For the seventh straight month, I expect the headline CPI to record further deceleration in its YoY growth rate, falling to 6.0% (from 6.4% in January). This is in-line with the consensus forecast, which is also at 6.0%.

Moving to the core CPI, I also expect its YoY rate to fall, hitting 5.4% (from 5.6% in January). This would make the fifth consecutive monthly moderation in its YoY growth rate, and is slightly below the consensus forecast of 5.5%.

While moderating YoY CPI growth rates will generate some positive headlines, the potential for another month of somewhat elevated MoM growth, risks another market overreaction to inflation concerns — which is likely to be particularly problematic given recent US bank failures, and the subsequent move by market participants to slash their expectations for future Fed tightening.

Let’s dig into the details.

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