US CPI today – last key data before FOMC

Today's release of Consumer price index (CPI) numbers will be most watched by traders and investors ahead of tomorrow's FOMC rate decision. CPI is scheduled to be released at 13:30 GMT. However today's CPI figure, may turn out to be a non-event for the market as FED is widely expected to hike rates.

Why important?

• FED's dual mandate is price stability and maximum employment. However, Unemployment rate has now reached 5.1% in US, which is considered as very close to long term level. That leaves inflation to be most vital for subsequent hikes.

• This is last key high profile release before FOMC decision tomorrow. So the reaction stands very crucial. Moreover it might even influence policy makers' debate.

• Moreover, inflation numbers even if don't influence tomorrow's decision on rates, it might influence over further guidance over next year.

Past trends -

• After staying below FED's 2% target, headline CPI fell to negative territory in final quarter of 2014. In January CPI fell by -0.7% on monthly basis, mostly due to lower energy prices. Yearly CPI fell by -0.1% YoY in January.
• Yearly change in CPI has been minimal since then, growing about 0.04% per month.
• Yearly CPI growth was +0.2% in October.
• However, core CPI has been showing remarkable resilience, monthly growth not falling below since February 2010. In October, prices grew by 0.2% m/m and 1.9% from a year back.

Expectation today -

• CPI is expected to remain flat m/m and rise by 0.4% yearly basis.
• Core CPI is expected to grow at 2% on yearly basis.

Impact -

• CPI may not be a major mover today as FED hike is very much expected. Unless there are major changes both to the downside or upside major volatility is unlikely.
• However, better reading might lead to some dollar buying ahead of FOMC tomorrow.

Dollar index is currently trading at 97.53, lowest level since October.