What are the distribution of forecasts for the US CPI?

Why it’s important?

In the Asian session, Eamonn published the range of estimates for today’s US CPI report. These ranges 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

CPI Y/Y

• 3.1% (2.3%)
• 3.0% (66.0%)
• 2.9% (31.7%)

CPI M/M

• 0.3% (10.0%)
• 0.2% (77.1%)
• 0.1% (12.9%)

Core CPI Y/Y

• 3.3% (31.8%)
• 3.2% (64.0%)
• 3.1% (4.2%)

Core CPI M/M

• 0.3% (2.9%)
• 0.2% (87.1%)
• 0.1% (7.4%)
• 0.0% (2.6%)

We can see that for the headline figures the forecasts are clustered around the bottom of the range of estimates, while for the core figures they are clustered around the upper bound of the range. This suggests that a miss on the core figures will have a much bigger impact than a beat.

This article was written by Giuseppe Dellamotta at www.forexlive.com.