Demand Imbalance Arbitrage

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January CPI Report to Provide Insight Into Fed’s Battle Against Inflation


Economists are expecting that the Consumer Price Index (CPI) will show a 0.5% increase in January, translating into 6.2% annual growth, according to a survey conducted by Dow Jones.[0] Excluding food and energy, so-called core CPI is projected to rise 0.4% and 5.5%, respectively.[1] This would be the biggest monthly increase since October.[2] Federal Reserve Chair Jerome H. Powell has acknowledged the presence of “disinflation” in the US economy.[3] However, the strength of the jobs market has worried some Fed officials, who are concerned that the tight labor market will lead to wage rises and will feed inflationary pressures.[4]

The January CPI report will be closely watched, as it will provide market participants with another reading into how the Federal Reserve is faring in its battle against inflation.[5] According to the Cleveland Federal Reserve’s “Nowcast” tracker, the Consumer Price Index (CPI) is projected to rise by 0.65% on a monthly basis and 6.5% year-over-year.[2] The forecast for the core is 0.46% and 5.6%.[6] A New York Federal Reserve consumer survey showed that expectations for inflation in 2023 were unchanged from 5% in December.[7] The New York Fed reported that the anticipated rate of inflation three years in the future was 2.7%, while inflation was forecast to be 2.5% five years from now.[8]

The Federal Reserve has increased rates for eight consecutive times in a period of less than twelve months, increasing by a quarter of a percentage point most recently; this is a slower pace than in nearly all of 2022.[9] It is predicted that the Federal Reserve will up their benchmark interest rate two times from the current 4.5%-4.75% target range.[6] This would equate to a further 0.5%, or 50 basis points.[6] Market analysis suggests that the Federal Reserve will ultimately settle at a rate of 5.18%.[6]

On Monday, the yield on the 10-year U.S. Treasury dropped to 3.71%. Monday saw a less than 1% drop in oil prices, temporarily halting the significant recovery which had taken place the week prior.[10] Futures of West Texas Intermediate were trading at slightly more than $79 per barrel.[10] On Tuesday, yields from the U.S. Treasury decreased as people in the investing world awaited the most recent consumer price index report and assessed the economic outlook. The 10-year Treasury yield was down 2 basis points 3.69%. The 2-year yield dipped 3 basis points to 4.51%.[0]

0. “Nasdaq, S&P futures point up as traders bet on on Valentine’s CPI treat” Seeking Alpha, 14 Feb. 2023,

1. “EURUSD runs up to the 200 hour MA ahead of the CPI. The key technicals ahead of CPI data.” ForexLive, 14 Feb. 2023,

2. “Markets Brief: January CPI Report Forecasts Show a Bump in the Road to Lower Inflation” Morningstar, 10 Feb. 2023,

3. “Consumer prices rose 6.4% in January” Fox Business, 14 Feb. 2023,

4. “US inflation eases again for seventh consecutive month” The Guardian, 14 Feb. 2023,

5. “CPI expected to jump M/M in January but cool Y/Y; don’t expect a Fed pivot” Seeking Alpha, 13 Feb. 2023,

6. “Inflation report due Tuesday has the potential to deliver some bad news” CNBC, 13 Feb. 2023,

7. “What consumers expect on inflation” Axios, 14 Feb. 2023,

8. “Inflation continued to cool in January” ABC News, 14 Feb. 2023,

9. “CPI: Prices rise 6.4 percent in January, seventh month of easing inflation” The Washington Post, 14 Feb. 2023,

10. “Dow Jones Surges 376 Points Into Key CPI Inflation Report; What To Do Now” Investor’s Business Daily, 14 Feb. 2023,

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