We expect Core CPI inflation decelerated to 0.24% m-o-m in February from 0.29% in January. Core goods inflation likely remained subdued at 0.14% m-o-m due to another decline in used vehicle prices. Supercore CPI inflation likely moderated in February at .3% MoM (from .59% MoM in Jan), with airline fares slowing sharply following extreme strength in January. Based on our current forecasts for CPI and PPI, we expect core PCE inflation decelerated to 0.25% m-o-m in February from 0.44% in January, which would bring its y-o-y change down to 2.9%. Despite the anticipated moderation, monthly core PCE inflation of 0.25% (annual rate of 2.9%) remains too high for the Fed. In addition, elevated geopolitical risks pose upside risk to the inflation outlook. We believe Fed might maintain status quo till Powell is Fed Chair followed by 2 rate cuts of 25 bps each in June & Sep as Kevin Warsh takes over as Fed Chair. We see markets more focussed on Iran events in short term and Feb CPI data might not be market moving to an extent. We remain bearish on risk assets and bullish on Crude prices in short term. The TACO trade is still not there for us to change our view.
