What is 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. 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.

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