January’s CPI print was modest on the headline and firmer on the core, with shelter again doing most of the work. This is consistent with a disinflation process that is intact but uneven: goods and energy can cool quickly; services and shelter tend to grind.
Key Points (From The Release)
- Headline CPI: +0.2% in January; +2.4% over the last 12 months.
- Core CPI (less food and energy): +0.3% in January; +2.5% over the last 12 months.
- Shelter: the shelter index increased in January and was the largest factor in the monthly increase.
- Energy: the energy index declined over the month.
- Food: the food index was unchanged (food at home down; food away from home up).
Westbridge Read-Through
The signal here is the “last mile” problem. A stable headline number can coexist with a core that stays firm if shelter and services cool slowly. That keeps policy optionality constrained: cuts become easier if core prints soften and the labor market cools in an orderly way.
For risk assets, this is a dispersion regime. If inflation continues to cool gradually, duration and quality tend to outperform. If shelter-driven persistence holds core inflation up, the risk is a renewed tightening impulse in financial conditions even without additional policy hikes.
Signals & Watchlist
- Shelter momentum: the key driver of core persistence.
- Services inflation: sensitivity to wages and demand conditions.
- Energy: the fastest-moving swing factor for headline inflation.
- Labor cooling: watch whether wages decelerate without a sharp unemployment jump.