Feb 2025 CPI Estimate

Wednesday at 8:30 am ET, we will get the Feb CPI. CPI is one of the 2 most important macro prints each month. CPI is perhaps even more important than usual, given the tariffs and their potential impact on inflation. If CPI comes in favorable, hopes of the Fed’s pause being over soon could go up. On the other hand, if CPI comes in hotter, the Fed could extend its pause.

My average error for estimating headline CPI (based on the last 24 CPI estimates from Feb 2023 - Jan 2025) is extremely low at -2 bps (-0.02 pp).

More importantly, my headline CPI estimates have been closer to the actual number than the average Wall Street estimates by 2 bps on average, 13 times in the last 20 months or 65% of the time.

My average error for estimating core CPI (based on the last 24 core CPI estimates from Feb 2023 - Jan 2025) is also extremely low at -2 bps (-0.02 pp).

My core CPI estimates have been closer to the actual number than the average Wall Street estimates by 1 bps on average, 14 times in the last 20 months or 70% of the time.

For public links to my prior month's CPI estimates, go to ArkominaResearch.com.

In 4 months from Oct 2024-Jan 2025, headline CPI went up from +2.44% YoY to +3.00% YoY. Nov was up +0.31% MoM, which was the first month in 7 that didn’t have +0.2% MoM or lower reads. Then, in Dec, the headline went up +0.39% MoM, which was the first +0.4% MoM read in 10 months. Jan 2025 came in at +0.47% MoM, the first +0.5% MoM read in 17 months. Contrary to expectations, core CPI managed to improve over the past 4 months from +3.31% YoY to +3.26% YoY in Jan 2025. Granted, it was +3.24% in Dec but went up a bit in Jan. Core CPI went up +0.45% MoM in Jan, which was the highest read in 21 months.

The biggest question on everyone’s mind is: What happened with CPI amid all the tariffs talk? Did headline and core CPI manage to improve? Or just one of them improved? Or did both of them fail to make progress in Feb?

My Feb CPI estimates are…

…mostly in line with consensus, except for core CPI where I expect a bit higher MoM read. They are also notably higher than the Cleveland Fed Nowcast.

• Headline CPI

  • +0.3% MoM

  • +2.9% YoY

• Core CPI

  • +0.4% MoM

  • +3.2% YoY

My unrounded estimates:

I am expecting to see progress on both headline and core CPI for the first time since Jul 2024. If we get these numbers, they may not make the Fed cut rates next week, but they could be a step in the right direction, potentially opening a door to cuts in May if other data cooperates.

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If you’re interested in learning my longer-term CPI estimates (until the end of 2025), consider subscribing to Marko’s CPI Report, which goes out each month before CPI and, among other things, contains analyses of:

1. Forward-looking inflation indicators

2. Detailed Feb CPI estimate

3. Headline and core CPI trajectory until the end of Q4 2025

4. Preliminary Mar CPI estimate

To get Marko’s CPI Report, make sure to subscribe to Arkomina Research Pro Investor at this link: ArkominaResearch.com/Subscriptions/

By subscribing to Pro Investor, you also get:

1. Marko’s Fed report that goes out before each Fed meeting and, among other things, contains a detailed analysis of the economy and what type of landing we are in, an analysis of monetary policy lags, what will the Fed likely do in 2025, headline and core PCE inflation trajectory and the unemployment rate trajectory.

2. Marko’s Brain Daily which goes out each trading day contains analyses of all relevant macro indicators and events (such as Fed speeches and Fed meetings) from the prior day, my estimates for all important macro indicators coming out that day, and how the market may react to each scenario, as well as my view of the equity and bond market short-term direction, earnings analyses and much more.

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DISCLAIMER

These articles are for discussion and educational purposes only.

Past performance is no guarantee of future results.

Although specific securities and economic forecasts may be discussed in articles, you should NOT construe any comment as a call to buy or sell any security or as legal, tax, investment, financial, or other advice. Consult your own advisors if you require such advice.

ANY USE OF THESE ARTICLES IS AT YOUR OWN RISK AND LIABILITY. Neither Arkomina Consulting Ltd nor Marko Bjegovic as its director or any employee accepts any liability whatsoever for any direct, indirect, consequential, moral, incidental, collateral, or special damages or losses of any kind.