BMO analysts are anticipating the Consumer Price Index (CPI) report on 12 March 2025, which may influence the Federal Reserve’s approach to achieve 2.0% inflation. Economists forecast a monthly gain of 0.3% in core CPI, down from January’s 0.446%, indicating persistent inflation concerns.
Attention will be on housing services and non-housing “supercore” inflation, which are projected to show signs of moderation yet remain historically high. It is noted that a complete evaluation will depend on Thursday’s Producer Price Index (PPI) data, which previously alleviated market anxieties regarding a strong CPI outcome.
Inflation Pressures Persist
BMO’s forecast suggests that inflation pressures have not disappeared, with core prices expected to rise at a slower pace but still well above levels consistent with the Federal Reserve’s 2.0% objective. The drop from January’s numbers hints at some relief, though not enough to alter monetary policy expectations in a meaningful way.
Shelter costs remain a focal point, particularly as they have contributed heavily to inflation persistence in recent months. Although a slowdown in growth is anticipated, the overall level remains elevated. This makes it difficult to determine whether inflation is truly abating or merely fluctuating within a narrow range. The non-housing “supercore” component—which strips out goods prices and focuses on services—will be equally scrutinised. Any deviation from projections could shift expectations around rate adjustments later in the year.
While Tuesday’s report will set the tone, a fuller picture will only develop after Thursday’s PPI release. Producer prices serve as a leading indicator of consumer costs, offering early insight into trends before they feed into broader inflation measures. Last month’s PPI data helped alleviate concerns, leading to a more muted response from markets. Should something similar happen this time, volatility may be contained, but any surprises could provoke sharper moves.
Market Expectations And Risks
Market participants must remain alert to the possibility of misaligned expectations. If core inflation registers higher than markets anticipate, sentiment could shift rapidly, affecting rate-sensitive assets. The potential for sudden adjustments means a one-directional view could invite risk. However, if both CPI and PPI come in softer, speculation about rate cuts may gain momentum, influencing how pricing pressures are perceived moving into the second quarter.
With these releases on the horizon, focus should be placed on how they interact with broader trends rather than viewing them in isolation. Any indication that core components remain stubbornly high could keep central bank officials cautious, delaying discussions of policy relief. On the other hand, a steady decline across key measures might provide justification for a less restrictive stance.
