Why it's important?
In the Asian session, Eamonn published the range of estimates for today's US CPI report. The ranges of estimates are important in terms of market reaction because when the actual data deviates from the expectations, it creates a surprise effect. Another important input in market's reaction is the distribution of forecasts.
In fact, although we can have a range of estimates, most forecasts might be clustered on the upper bound of the range, so even if the data comes out inside the range of estimates but on the lower bound of the range, it can still create a surprise effect.
Distribution of forecasts for CPI
CPI Y/Y
- 2.4% (18%)
- 2.3% (71%)
- 2.2% (11%)
CPI M/M
- 0.2% (6%)
- 0.1% (85%)
- 0.0% (9%)
Core CPI Y/Y
- 3.3% (4%)
- 3.2% (63%)
- 3.1% (31%)
- 3.0% (2%)
Core CPI M/M
- 0.3% (26%)
- 0.2% (74%)
We can ignore the headline CPI as the market will focus on the Core figures. We can notice that the bias is skewed to the downside, so an upside surprise will have a greater impact on the markets.