The US CPI data for Jan'26 is due for release on 13th Feb. We expect Core CPI inflation to have rebounded sharply to 0.4% m-o-m in January from .239% in December driven by positive residual seasonality, delayed tariff pass through, and lingering effects of the 2025 government shutdown. Core CPI inflation tends to be strong in January, and we expect this pattern will continue in this report. We forecast core CPI goods price inflation rebounded to 0.4% m-o-m in January. Tariff pass-through was gradual until December. However, it is likely that retailers passed higher costs onto their customers through post-holiday price adjustments in January. Regular rent inflation likely moderated while OER inflation appeared to remain sticky. Certain service components which tend to increase in January will likely make another positive contribution to core CPI inflation in this print. Our forecast for suprecore CPI inflation is 0.55% m-o-m, the highest since July 2025. If our above views are correct, Jan CPI might look elevated. Hence any rate cut expectations might reduce further till May i.e. when Powell leaves as Fed Chair might further reduce. But we continue to expect two more rate cuts of 25 bps each in CY26, one in the 17th June FOMC meeting & the last cut in the 16th Sep FOMC meeting. These two rate cuts might be more from an insurance cut perspective under the new Fed Chair Warsh. We continue to remain bullish on US equities. We had given a long S&P recommendation on 8th Nov’26 at 6729 levels. Currently we are at 6932 and our profit target is 7015. https://macro-spectrum.com/trade-recommendation/buy-sp-500 In an inflationary world, equities tend to do well due to higher nominals. We have also observed that for the past two weeks, there has been a strong rotation from large cap techs to small caps & real economy stocks. Last two week’s volatile behaviour is a healthy deleveraging & we remain optimistic on US equities.
