Core CPI declines but gives up some steepness

Core inflation y/y and its Acceleration


Core inflation dropped to 5.6% y/y, down from the previous print of 5.7% y/y. The decline gives way gradient (blue circle) and missed the consensus of 5.5% y/y. It is moving in the right direction.

Higher housing prices, car insurance, recreation, apparel and household furnishing contributed to January's inflation.

Core has now moved into deceleration territory on an annualised basis (green rectangle). This is a key development. It will need to maintain below zero for the Fed's inflation target of 2% average to be hit. Oscillations around zero, will see core plateau.

The US 10-Year Real Rate


The steepness of the core inflation has flattened and its acceleration position is tentative. After the print, the real rate showed a spinning top (red arrow). The market was unsure how positive or negative the numbers were.

Trade the News: View our Economic Calendar

The candle after (still to complete) has charted a higher high and a higher low (green arrow), with market participants leaning towards the Fed needing to do more work to ensure that they reach their target. This will suggest a risk-off sentiment in the near-term, if the pattern is maintained.

Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.

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