US CPI to be released tomorrow: Forecast 2.5% vs 2.8% previously

CPI Forecast 2.5%: Inflation Stable Thanks to Falling Oil Prices

The expected CPI decline from 2.8% to 2.5% reflects some of the positive impact of the decline in oil prices in the fourth quarter of 2024, according to analysts. The decline in oil prices has eased pressure on energy costs – a key component of the basket of goods and services used to calculate the CPI. This has raised hopes that the US Federal Reserve (Fed) may continue to maintain or even ease monetary policy, especially as inflation moves closer to the central bank’s 2% target.

However, the 2.5% forecast is not a safe bet. With the global economic landscape still facing significant uncertainty, including supply chain disruptions and geopolitical upheaval, a higher-than-expected CPI reading – even a slight one – could trigger an immediate negative reaction in financial markets. Intraday traders are particularly sensitive to such small changes, as market sentiment is amplified by the speed at which information spreads through social media and modern news platforms.

Short-Term Fluctuations: 2.6% Level Is Still a “Green Signal”

Experts say that if the actual CPI falls to around 2.6%, the market can still see this as a positive result. A slight increase from forecasts will not change the general expectation that inflation is under control, while avoiding major shocks that could cause stocks to fall or the dollar to fluctuate. Conversely, if the CPI exceeds 2.6% – say, hitting 2.7% or higher – investors may worry that the Fed will have to delay its rate-cutting plans, leading to selling pressure on risk assets like stocks and cryptocurrencies.

This sensitivity is further reinforced by the speed at which information spreads in the digital age. A single headline of “higher than expected CPI” can amplify volatility within minutes through automated trading algorithms and knee-jerk reactions from individual investors. This makes it challenging for both long-term and short-term investors to maintain their strategy amid the “news storm.”

Long-Term Effects: Trump's Tariffs Will Impact the Future

Regardless of tomorrow’s CPI reading, another important factor looming large is President Donald Trump’s tariff policies. Since taking office, Trump has quickly implemented new tariffs on imports from Canada, Mexico, and China, ranging from 10% to 25%. These policies, while not yet fully reflected in current CPI data, are expected to increase the cost of imported goods and push up inflation in the coming months.

Economists say the impact of tariffs will not be immediate, but will take time to permeate supply chains and consumer prices. For example, prices for building materials, cars, and consumer goods imported from China could rise, leading to a rise in inflation in mid- or late 2025. If that happens, the Fed could face a difficult task: controlling inflation while avoiding hurting economic growth — a “stagflation” scenario that no one wants.

What is the Market Preparing for?

Investors are now holding their breath as they await the CPI data. If the actual figure is closer to the forecast of 2.5% or lower, the US stock market – especially indices like the S&P 500 and Nasdaq – could rally on optimism. At the same time, the price of cryptocurrencies like Bitcoin could also benefit as investors seek riskier assets amid expectations of a Fed easing. Conversely, a figure far above 2.6% could drag the market down, strengthening the US dollar and pushing up US government bond yields.

Still, analysts caution investors against focusing solely on short-term volatility. The longer-term impact of Trump’s tariffs and the Fed’s response will shape market trends in the second half of 2025. Preparing for both scenarios — controlled inflation or rising inflation — will be key to navigating this period of uncertainty.

Conclude

Tomorrow’s CPI announcement is not only a test of the current inflation situation but also an important signal about the direction of US monetary policy. With a forecast of 2.5% in the context of falling oil prices, the market is expecting a positive result, but the fragile “room” makes any development potentially surprising. Meanwhile, the shadow of Trump tariffs is gradually becoming clear, promising to bring bigger changes to the US economy in the near future. Investors, therefore, need to stay alert and flexible to deal with both opportunities and risks ahead.