After the market yoyoed like a volatile, drunken sailor for much of 2022 and 2023 after every monthly CPI print, focus gradually shifted away from the inflation number and to unemployment because the Fed, conventional wisdom claimed, had inflation under control and so the only gating factor for Fed policy was slack or tightness in the labor market. But now that the labor market has slowed down substantially and appears to have stabilized in the low-100K range even as inflation refuses to make the trek from 3% to 2%, and in fact is started to pick up again, attention is once again shifting to the CPI number, so much so that according to JPM, S&P option straddles are pricing in a whopping 1.3% swing in the S&P on Wednesday, one of the largest implied move ahead of a CPI print since the regional bank turmoil of 2023.
In other words, the CPI matters a lot, again.
The good news, for Trump, is that last month's CPI report came in cooler than expected, with Core CPI missing expectations both sequentially and YoY (while headline CPI rose at a 2.9% annual pace, the highest since July, if in line with estimates)
