The trading world awaits the final piece to this week’s US economic puzzle, with the US Consumer Price Index (CPI) releasing tomorrow at 8:30 A.M. (ET).
After a cold Retail Sales (0% vs 0.4% exp) and a surprisingly strong Non-Farm Payrolls report (130K vs 70K exp), the third wave of high-tier US data should provide the answers for early 2026 rate cut pricing (and if they are even still a thing).
The Federal Reserve had pivoted within its dual mandate, putting less emphasis on the inflation mandate and prioritizing a visibly weakening labor market, to justify the streak of 25 bps cuts between September and December 2025, from 4.50% to the current 3.75%.
Ahead of these cuts, the Fed held a frustrating pause (at least frustrating for President Trump) since December 2024.
After the massive -140K drop in October, Non-Farm Payrolls rebounded through a gradual recovery and haven’t reported a figure below +40K since. Hence, communications from the Fed quickly turned back to inflation.
Core CPI, which excludes volatile Energy and Food prices from the headline Index, remained much closer to 3% than the 2% mandate throughout 2025, with the effects of the infamous Trump Tariffs delaying post-COVID inflation drops further (compared to what was seen in Canada, for example). And that hasn’t sat well with the Fed.