The key data that the Federal Reserve (Fed) considers when setting interest rates, the Consumer Price Index (CPI), will be released on the evening of the 13th. The Fed currently predicts that CPI will continue to slow down. In addition, several Fed officials will give speeches this week, and Coinbase will announce its financial report.
The Federal Reserve (Fed) announced on February 1st at the FOMC interest rate decision meeting that it would stop raising interest rates for the fourth time and keep the interest rate range unchanged at 5.25% to 5.5%. Chairman Jerome Powell also stated after the meeting that it is unlikely that the inflation rate will fall to the Fed’s target of 2% before the March meeting, which means that it is unlikely to start lowering interest rates in March as optimistically expected by the market.
Next, we will summarize the potential events that may bring volatility to the market this week.
One of the two key inflation data that Fed officials refer to when setting interest rates, the Consumer Price Index (CPI), will be released at 9:30 pm Taiwan time on February 13th.
According to the Fed’s real-time forecasting model, the CPI in January increased by 0.1% month-on-month and reached an annual growth rate of 2.94%. It is expected to fall below 3% for the first time in nearly two years. The core CPI, which excludes food and energy prices, increased by 0.32% month-on-month, and the annual growth rate will slow down from 3.9% in December to 3.81%.
Source: Fed Real-Time Inflation Forecast
According to a report from Reuters, the US Department of Labor has just released revised CPI data. The month-on-month increase in CPI in December was 0.2%, not 0.3% as previously announced. However, the data for November was revised upward to a month-on-month increase of 0.2%, not the previously predicted 0.1%. The overall revision of the inflation data is mixed, but it has not changed people’s expectations for the timing of the Fed’s expected interest rate cut this year.
The CME Fed Watch data shows that Powell’s remarks have greatly dampened market expectations for a rate cut in March. The probability of a pause in rate hikes at the March meeting has risen to 83.5%, and the probability of a rate cut of one basis point is only 16.5%. The probability of a rate cut of one basis point at the May meeting exceeds 53.5%, and the probability of a rate cut of two basis points is 9.1%. The probability of keeping the rate unchanged again is 37.4%.
CME Fed Watch Tool May Forecast Data
In addition, the market is also paying attention to the views of Fed officials on interest rate cuts. This week, officials with voting rights this year, including Thomas Barkin, President of the Richmond Federal Reserve Bank, Mary Daly, President of the San Francisco Federal Reserve Bank, Raphael Bostic, President of the Atlanta Federal Reserve Bank, and Vice Chairman Michael Barr of the Federal Reserve, will give speeches.
Bostic stated in mid-January that he would like to see more evidence that inflation is expected to reach the central bank’s 2% target. He currently expects policymakers to cut interest rates for the first time in the third quarter, but he also added that if the decline in inflation is “much faster” than his expectations, he would be willing to take action earlier. Barkin stated last week that four Fed officials’ remarks this week indicated that they are “not eager to cut interest rates.”
On the other hand, Coinbase (COIN-US) will announce its financial report this week. As the largest compliant exchange in the United States, the market is paying close attention to whether it can bring corresponding business growth with the recovery of the market.
Other corporate financial reports to be released this week include Cisco, Coca-Cola, Shopify, Sony, and other giants.
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