On Wednesday, the Bureau of Labor Statistics will release the Consumer Price Index (CPI) data for January. “Falling oil prices should continue to weigh on the energy category, where we see prices falling 1.8%. Food prices should provide just a partial offset with a 0.3% gain. Altogether, we see headline CPI rising 0.06% after a 0.06% drop in December,” Morgan Stanley wrote in a note on Friday.The Federal Reserve often looks to CPI data as a key inflation gauge. Given that the central bank has indicated that it will be “patient” and “data-dependent,” the CPI data will play an even more critical role.
“After the dovish January FOMC, some market participants hold the view that only a pick-up in inflation will precipitate further Fed hikes,” Citi wrote in a note on Monday. “While we believe two more hikes are possible this year if global growth risks stabilize and US growth remains strong, possible upside to inflation over the next few months could help convince markets of further hikes.”
Moreover, Nomura research from Friday stated that the higher tariffs may have impacted U.S. consumer prices in three ways: imported consumer goods prices, production costs and substitute goods prices.
“We tested all goods prices of CPI excluding energy. Our results suggest that food prices did not appear to be affected significantly but certain consumer goods prices such as sports equipment, used vehicles, furniture and bedding, appliances and sport vehicles including bicycles were impacted by the new tariffs,” Nomura said. “Contributions from these affected items to m-o-m core CPI inflation became pronounced in the second-half of 2018, suggesting that core inflation may have been pushed up by tariffs.”
In addition, the following companies that will be reporting earnings on Wednesday: Hilton Worldwide Holdings (HLT), Teva Pharmaceuticals (TEVA) before market open; Cisco Systems (CSCO), Hyatt Hotels (H), Marathon Oil (MRO), MGM Resorts (MGM), Yelp (YELP) after market close.
Heidi Chung is a reporter at Yahoo Finance. Follow her on Twitter: @heidi_chung.
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