14.02.26 - CPI data surprise

US inflation data surprised positively in January, with CPI coming in at 2.4%, below estimated 2.5% and down from 2.7% last month. At first glance, this supports the disinflation narrative.

Markets:
Equities: Under renewed pressure, led by tech and AI-related names
Bonds: Yields falling sharply on renewed rate-cut hopes. US 10-year yields falls to 4.05%
Currencies: USD continues to weaken while Swiss franc strength continues
Commodities: Rising across metals

My View: The softer CPI print does not change the broader picture materially:

• Fed rate cuts are not a given as the US labor market remains resilient.

• Tariffs remain inflationary: based on a recent report, around 90% of tariffs are ultimately paid by consumers, adding structural price pressure.

• Rising commodity prices matter: Even without higher oil prices, rising metals and input costs feed into production and consumer prices over time.

• Weaker USD: could become an additional inflation driver later in the year as import costs are rising.

Markets may be tempted to price in a smooth disinflation and rate cuts. The risk is that inflation pressures return via tariffs and commodity prices – keeping volatility elevated and narratives unstable.

Become a member to access more valuable market updates like this