North America Economic Research13 February 2024J P M O R G A Nwww.jpmorganmarkets.comEconomic ResearchDaniel Silver(1-212) 622-6039daniel.a.silver@jpmorgan.comJPMorgan Chase Bank NAThe January consumer price index (CPI) data were firmer than expectations, with the headline up 0.3% during the month and the core index rising 0.4% (0.392% to three decimals). The broad trend in headline inflation continued to moderate, with the related year-ago rate cooling from 3.4% to 3.1% oya between December and January. The year-ago rate on the core also continued to trend lower into January, although with rounding it came in at 3.9% oya in both December and January. But it is hard to feel confident that the broad trend for core inflation is moderating when the January increase was the largest monthly gain since April 2023 and the related three-month run rate picked up to its highest level since June 2023, hitting 4.0% saar in January. While the January strength in the core CPI marked a change from what had been a softer trend over the prior few months, that month on its own may not be indicative of the new underlying trend. There are still four more CPI reports scheduled for release ahead of the end of the June FOMC meeting and we are sticking with our call that the Fed will start lowering rates at that meeting.There were only a few major categories of the CPI with weak readings in January. Energy prices fell 0.9% in January, continuing their recent downward trend. Apparel prices also continued their recent soft run, declining 0.7% in January. Used vehicle prices, meanwhile, dropped 3.4% that month, marking their largest monthly decline since 1969. This plunge in used vehicle prices kept the broad core goods aggregate trending lower in January (-0.3%), but away from used vehicles, core goods prices ticked up 0.1% in January, marking their largest monthly increase since early-2023. The food price index in the CPI, meanwhile, rose 0.4% in January, which was the largest increase since January 2023. And the core services price index jumped 0.7% in January, posting the largest monthly increase since September 2022 and showing strong readings throughout many of the related subcategories. The supercore index (core services ex. rent measures) jumped 0.8% in January, marking one of its largest monthly increases in recent decades. And owners� equivalent rent also looked firm, rising 0.6% (although the tenants� rent measure looked much softer, moving up “only� 0.3% in January).With the January CPI data now in hand, we think that core PCE inflation is tracking 0.29% in January, with this measure up 2.7% oya. Friday�s PPI report also will contain important related information. (We also will get annual revisions to the PPI data tomorrow morning, but the related PCE price data are derived from the underlying unadjusted indexes so these revisi...
