US CPI: The Inflation Bunny Fails to Show Its Head in January

January US headline CPI cooled to 2.4% yoy, lower than estimates, fueling market expectations for further Fed rate cuts. However, structural pressures from tariffs and a tight labor market suggest inflation may remain above the 2% target.

Key Takeaways

• 1.Headline January CPI rose 2.4% yoy, coming in lower than the 2.5% consensus estimate.
• 2.The market is now pricing in a 50% chance of a third rate cut, driving 2-year Treasury yields to multi-year lows.
• 3.Business behaviors regarding tariffs are shifting, with firms beginning to pass costs to consumers as pre-tariff inventories are depleted.

Table of Contents

• US CPI: THE INFLATION BUNNY FAILS TO SHOW ITS HEAD IN JANUARY
• Berenberg Macro View
• Where is the residual seasonality?
• Too complacent about goods inflation?
• Some are just getting started
• Long-term inflation expectations and the Fed's balance sheet
• Disclaimer

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