CPI Data January 2025: Inflation Rise Expected

As the US economy heads into the new year, economists predict a rise in inflation, with the Consumer Price Index (CPI) anticipated to increase 2.9% year-over-year in December, up from 2.7% in November. The upcoming CPI report, set to be released in January, is expected to provide further insight into the US economy's inflation dynamics, influencing the Federal Reserve's decision on interest rates in 2025.

The high inflation has led to speculation about the Federal Reserve cutting interest rates in 2025, but some economists suggest it could be a pause or even a hike instead of a cut. The report's release will be closely watched by investors and policymakers, as it will provide a clearer picture of the US economy's inflation trajectory. Core CPI, which strips out volatile food and energy categories, is expected to remain steady at 3.3% year-over-year, while analysts believe that goods deflation will help offset a rebound in housing inflation, leading to a slight decrease in core inflation.

The US Dollar's strength is also being closely monitored, with a higher US dollar potentially pressuring employee investments in taxed retirement accounts. The DXY has formed a golden cross pattern with the 100-day MA crossing above the 200-day MA, supporting the bullish momentum. However, tariff rumors from the Trump team have led to a pause in the US Dollar's rise, with the DXY retreating from the psychological 110.00 handle. Key support for the DXY is at 109.57, and a break above 110.00 could signal a move towards 111.00.

As the US labour market prepares for a highly anticipated shift in the coming weeks, economists are forecasting quantitative easing measures in 2025. The release of the CPI data on January 14 and 15 will be closely watched, with PPI data expected to increase 0.3% MoM and CPI to rise 0.4% MoM. However, some analysts expect a milder print, and the Federal Reserve is likely to keep interest rates unchanged in January, despite inflation concerns.