Today, the US Consumer Price Index (CPI) report will be a crucial staging post for any Fed cuts this year. Economists at Commerzbank analyze why it is simply too early to think about cutting rates under current circumstances.

Disinflation is a marathon, not a sprint

We expect the core rate to be similar to the monthly rate in December. The annual rate is likely to fall only slightly. The annual rate for the headline rate is expected to fall somewhat more sharply, but here the dynamics on a month-on-month basis are similar. In other words, a continuation of the momentum of recent months.

At this point, one might ask why I am commenting so extensively on today's figures when, on the face of it, they contain little new information. There are several reasons. Firstly, we could of course be in for a surprise today. And the surprises of recent months have made it abundantly clear that things can then get very volatile.

On the other hand, the figures are also likely to underline what the Fed has been keen to stress over the past two weeks. Namely, a few more months of good data may be needed before the all-clear can be given. If the figures come in as expected, it should make it clear to the last market participant that a rate cut as early as March is unlikely.