US Awaits Key December CPI Data Amid Inflation Concerns and Fed Policy Debates

Upcoming CPI Release Highlights Inflation Trajectory

US policymakers will receive a critical update on inflation through the **December Consumer Price Index (CPI)** data this week. Headline inflation is forecasted at **2.7% year-over-year** for the second straight month, with core inflation expected to edge up slightly to **2.7%**.[3][2]

Recent data quality issues from a government shutdown have raised cautions, as October price statistics were missed and November collections were delayed. This has led markets to view prior drops—from 3.0% headline in September to 2.7% in November, and core to 2.6%—with skepticism.[2]

Fed Speakers to Address Labor Market Signals

A heavy lineup of **Federal Reserve officials** will speak this week on the economic outlook and monetary policy. Markets are focusing on their remarks about the labor market, given mixed signals from December's nonfarm payrolls.[3]

Excluding non-cyclical sectors like health care, private nonfarm payrolls fell by **1.5k** in December and averaged **-19.4k** over the prior three months. Downside risks to employment are rising, supporting calls for additional **Fed funds rate cuts**.[3]

Rates were cut by **25 basis points** at each of the last three meetings, but a further cut is not widely anticipated until June due to sticky inflation concerns.[2]

Retail Sales and Industrial Data in Focus

November retail sales data, due Wednesday, is projected to show a **0.5% month-over-month** increase, rebounding from 0% in October on stronger car sales. The retail sales control group, key for GDP estimates, is expected at **0.4%** versus 0.8% prior.[3]

Consumer spending remains resilient, though rising job insecurity may boost precautionary savings and temper future outlays. Updates on industrial production and producer prices will also provide insights.[2]

Supreme Court Eyes Trump Tariff Powers

The **US Supreme Court** may rule as early as Wednesday on President Donald Trump's use of emergency tariff powers. Online betting markets peg the odds of upholding the tariffs at under **30%**.[3]

Tariffs have been noted as a factor pushing up inflation, even as broader pressures moderate per ISM prices paid indexes and average hourly earnings growth of **3.8% year-over-year**.[3][1]

Broader Economic Context

Upside risks to prices are fading, with average hourly earnings aligning with the Fed's **2% inflation goal** when factoring in **2% annual nonfarm productivity growth**. This leaves room for policy easing to support the labor market.[3]

• Key Data Releases This Week:
• December CPI (Tuesday)
• November retail sales (Wednesday)
• Industrial production and producer prices
• Multiple Fed speeches on labor and policy

These developments come as markets anticipate no immediate rate changes, balancing inflation caution with employment softening. Policymakers remain split on loosening to bolster jobs or holding firm against persistent price pressures.[2]