What to Expect From Wednesday's Inflation Data

Bonds lost ground overnight in sympathy with European bonds. The domestic session was almost perfectly flat and entirely uneventful. Powell's testimony was a complete non-event with no new concepts for anyone who's tuned in to the past few appearances. Wednesday brings the critical CPI data. There's plenty of anxiety over this one as early year inflation data is notoriously more difficult to forecast. That said, forecasts always do a perfect job of accounting for changes in annual CPI that result from older data falling out of the calculation (because that's just simple math, after all). In addition to forecasting difficulty, markets are also eager for clarity on whether inflation continues stalling at prevailing levels or begins to make renewed progress toward the 2% target. Needle-threading is always possible, but any major indication in one direction or the other will likely give rates a big push in the logical direction.