The economic data calendar in the January 8 week is light. There will be plenty of time to digest the implications of the December employment numbers. However, the week does have one critical data report that will advance the outlook for Federal Reserve monetary policy.
The December CPI at 8:30 ET on Thursday should offer more evidence that inflation is coming down steadily at the all-items level, but more in question is if the core CPI persists at levels Fed policymakers call too high and support keeping monetary policy restrictive for longer.
What will be important in assessing the outlook for monetary policy is knowing just how quickly inflation is improving, and if the long and variable lags in the impact of previous rate hikes are catching up with the aggressive increases in rates between March 2022 and June 2023.
In addition to the regular month-over-month and year-over-year data, December’s number will also include a reading on the CPI change half-over-half. If there are signs the upward consumer price pressures are abating more rapidly in the second half of 2023 than in the first half, it should cement the FOMC’s decision to pause on further rate hikes and give the FOMC’s forecast more certainty for modest rate cuts later in 2024.
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