Synopsis:

Credit Agricole forecasts headline CPI to decline to 2.88% YoY (from 3.00%), with core CPI rising 0.30% MoM, moderating from January’s 0.45% surprise. While core services inflation remains firm, overall disinflation is expected to persist. The Fed is likely to stay in wait-and-see mode, with rate cuts expected in June and September.

Key Points:

1️⃣ Headline CPI to Ease to 2.88% YoY 📉

• Marginal decline in inflation, broadly in line with market expectations.

2️⃣ Core CPI Expected at 0.30% MoM 🏷️

• Down from January’s 0.45% but still above target.
• Core services inflation (0.38% MoM) remains firm, driven by airfares, car insurance, and hotels.

3️⃣ Inflation to Remain in the 3.00-3.25% YoY Range Until Year-End ⏳

• Tariff effects expected to build in H2 2025, keeping inflation sticky.

4️⃣ Fed Likely to Stay on Hold Until Mid-Year 🏦

• Core PCE could reach 2.4% in Q2 2025, reinforcing a cautious Fed stance.
• First 25bp rate cut expected in June, followed by another in September.

Conclusion:

Credit Agricole expects a mild decline in inflation, keeping the Fed in wait-and-see mode. With core CPI still sticky and tariffs posing upside risks later in the year, the first Fed rate cut is likely in June, followed by another in September. Markets will be watching for confirmation of further disinflation in the coming months.