If the U.S. CPI achieves five consecutive increases tonight, will the Federal Reserve's interest rate cut be put on hold?

The Zhitong Finance APP noted that forecasters expect the U.S. consumer price monthly report to show an increase for the fifth consecutive month, strengthening the case for the Federal Reserve to pause interest rate cuts.

According to the median estimate from a Bloomberg survey, the core consumer price index, excluding food and energy, is expected to rise by 0.3% in December, while the overall index is expected to rise by 0.4%. The U.S. Bureau of Labor Statistics is set to release the CPI report on Wednesday.

The data released on Wednesday comes at a critical time for investors and policymakers. Since the CPI data was released last month on December 11, the yield on the 10-year U.S. Treasury bond has risen by more than half a percentage point due to renewed inflation concerns. The median expectation for a 0.3% increase in core CPI data masks the divergence among forecasters, with 39 predicting a median increase, while 32 predict a modest increase of 0.2% in core CPI data.

U.S. core inflation remains strong for the fifth consecutive month

Bloomberg economists Anna Wong and Chris G. Collins stated, "The CPI report for December may raise concerns about a stagnation in the deflation process." "The market's focus is whether the yield on the 10-year U.S. Treasury bond will break 5%. The CPI data and other macro data we expect this week suggest that this is indeed possible."

Rent

The two most important components of the consumer price index (CPI)—owner's equivalent rent and primary residential rent—saw their increases in November reach the lowest level since early 2021, leading to expectations that the long-awaited slowdown has finally begun. Throughout 2024, these figures have been volatile, with most analysts expecting the December reading to be slightly higher, but the magnitude may ultimately determine the broader core index's outcome.

In a report preview, Morgan Stanley economist Diego Anzoategui stated, "We expect primary residential rent and OER to accelerate, but still remain below the underlying trend this year." "This is not our modal forecast, but the core CPI data for December could reach 0.2%. A weaker rebound in rent or auto insurance could lead to core CPI easily falling below 0.25%."

Travel

Categories related to travel—such as accommodations, airfare, and dining out—are typically seen as indicators of potential consumer demand, and prices have generally seen strong increases in recent months.

Analysts have differing views on the outlook for hotel prices, especially after the accommodation category saw a 3.2% increase in November, the fastest monthly increase in over two years. Some expect hotel prices to decline significantly in December, while others, such as Pantheon Macroeconomics Chief U.S. Economist Samuel Tombs, expect hotel prices to rise significantly again "During the holiday period, travel reached a historic high; the number of airline passengers in December was 10% higher than in 2019," Tombs said. "Additionally, according to data from STR Inc, the average daily rate for hotel rooms in December increased by 2.8%, significantly higher than the average increase of 0.3% in the previous three Decembers."

Furniture

Following a significant price drop at the end of 2023, the pace of deflation for commodities (excluding food, energy, and used cars and trucks) slowed in 2024, with these goods referred to as "core commodities." In November, they rose by 0.1%, primarily due to a 0.7% increase in home furniture and furnishings.

Skanda Amarnath, Executive Director of Employ America, stated that amid concerns about the impact of the incoming Trump administration's policy proposals, Federal Reserve officials may look to core commodities for clues about the overall inflation trajectory.

"If tariff uncertainty manifests through expected behavior, then price increases could occur before policy announcements," Amarnath said. "If core commodity prices begin to rise from November, we will remain highly cautious about the prospects for further interest rate cuts."