Synopsis:

Goldman Sachs expects a slightly hotter-than-consensus January CPI report, forecasting core CPI at 0.34% MoM (vs. 0.3% consensus) and headline CPI at 0.36% MoM (vs. 0.3% consensus). The year-over-year core inflation rate is expected at 3.19%.

Key Points:

1. Core CPI to Rise 0.34% MoM (vs. 0.3% consensus):

   • Annualized core CPI to reach 3.19% YoY (vs. 3.1% consensus).
   • Core inflation remains sticky, suggesting inflationary pressures persist.

2. Headline CPI to Increase 0.36% MoM (vs. 0.3% consensus):

   • Driven by higher food prices (+0.4%) and higher energy prices (+0.6%).
   • Suggests broad-based price pressures, particularly in consumer essentials.

3. Implications for Core PCE:

   • Forecast implies core PCE for December could rise 0.32%.
   • Reinforces the Fed's cautious approach to rate cuts, as inflation remains above target.

Conclusion:

Goldman Sachs expects a slightly stronger inflation print, reinforcing concerns that inflation may not cool fast enough to justify early Fed rate cuts. If realized, this report could keep USD supported and push back market expectations for the Fed’s first rate cut.