2024 US Inflation Data Overview: CPI Forecast Key Moments and Decision Logic

Key Conclusions on the 2024 US CPI Forecast

Investors focus on the US CPI not for the numbers themselves, but to understand the underlying economic logic. According to multiple institutions’ forecasts, the US CPI in 2024 is expected to bottom out in Q1, rebound in Q2, and then decline again in the second half. This trend is driven by a combination of factors such as declining crude oil inventories, election cycles, and geopolitical risks.

Why are these forecasts important? Because the US CPI is a leading indicator of global asset price fluctuations; it directly influences the Federal Reserve’s rate-cutting pace, and every Fed decision impacts markets worldwide.

Interpreting the Three Major Inflation Indicators: Who Should Investors Watch?

Many people confuse the concepts of US CPI, Core CPI, and PCE, but they play very different roles in the market.

US CPI vs Core CPI: The main difference lies in whether food and energy prices are included. Since food and energy are susceptible to shocks (e.g., Red Sea crisis causing freight rate surges), Core CPI excludes these volatile items, providing a more stable inflation trend signal. For investors, Core CPI better reflects true price pressures.

US CPI vs PCE: CPI uses a traditional weighting method, while PCE employs chain-weighting, which better captures consumer substitution behavior. For example, when oil prices surge, consumers switch to alternative energy sources; PCE can more sensitively reflect such structural changes. Therefore, the Fed relies more on PCE data for policy decisions, while markets pay closer attention to CPI because it is released earlier.

Year-over-year growth rate is a key comparison dimension—compared to month-on-month, YoY figures more effectively eliminate seasonal factors and reflect the true trend of prices.

US CPI Data Release Schedule for 2024

US CPI is usually released on the first business day of each month or the closest business day, with timing varying due to daylight saving time:

• January-February, November-December: 21:30 Taiwan time (Standard Time)
• March-October: 20:30 Taiwan time (Daylight Saving Time)

Important release dates include: January 11, February 13, March 12, April 10, May 15, June 12, July 11, August 14, September 11, October 10, November 13, December 11. Mark these dates early, as CPI releases often trigger significant market volatility.

Internal Composition of US CPI: Finding the True Drivers

US CPI is not a single indicator but composed of multiple sub-components with different weights. Among them:

Housing costs (including rent) account for the largest share, around 30-40%, making it the biggest driver of CPI increases. Food and beverages follow, at 13-15%. Although energy only accounts for 6-8%, its volatility is the greatest, and its impact on CPI is often underestimated.

Additionally, healthcare (7-9%), education and communication (6-7%), and transportation services (5-6%) are also important. Analyzing these sub-components helps investors more accurately predict the next moves of CPI.

Four Perspectives on the 2024 CPI Forecast Logic

Historical Cycle Insights

Since the 1990s, the US has experienced four distinct CPI cycles. Each decline in CPI has coincided with economic crises—such as the 1991 Savings and Loan crisis, the 2001 dot-com bubble burst, the 2009 subprime mortgage crisis, and the 2020 pandemic shock. After each stimulus, CPI tends to rebound rapidly into overheating.

The 2020 case is particularly noteworthy: the pandemic caused a short-term CPI plunge, but after massive Fed easing, CPI soared to historic highs in 2021-2022 before gradually declining. This historical pattern offers reference for understanding the current situation.

Hidden Impact of Global Logistics

Recent Red Sea crisis reminds markets that regional logistics disruptions have a much larger impact on inflation than expected. Houthi attacks forced shipping companies to reroute, causing freight rates on Asia-Europe routes to double after early December 2023. Although the impact was limited compared to the “Ever Given” incident in 2021, rising logistics costs will eventually pass through to consumer prices. This is a variable often overlooked in the 2024 CPI forecast.

Constraints on Fed Rate Cuts

According to CME Group data, markets expect the Fed to cut rates by 6 basis points in 2024. But whether this materializes depends on whether CPI follows the predicted downward trend throughout the year. If CPI rebounds more than expected in Q2, the Fed will have to slow down rate cuts, impacting stocks and bonds.

Election Year Uncertainty

The 2024 US presidential election adds extra uncertainty. Regardless of which camp wins, they may overpromise welfare policies to win voters, leading to increased fiscal stimulus. Coupled with accelerating de-globalization and geopolitical risks, inflationary pressures are likely to rise. This is the fundamental reason many analysts believe CPI in 2024 will struggle to decline significantly.

IMF’s Latest 2024 Economic Forecast

The IMF’s latest forecast shows global economic growth at 3.1% in 2024, with the US at 2.1%, remaining ahead of major developed countries. This indicates the US economy remains resilient, and inflationary pressures are unlikely to ease substantially. In contrast, the Eurozone’s growth is only 0.9%, highlighting the relative strength of the US economy.

Regarding global inflation, it is expected to fall to 5.8% in 2024 and further to 4.4% in 2025. However, this downward pace may not be as smooth as the market anticipates.

Why Is the 2024 US CPI Forecast So Challenging?

Commodity prices like crude oil experienced volatility and decline in the first half of 2023. This low base effect should keep CPI in the first half of 2024 on a downward trend. But three major factors complicate this:

First, crude oil inventories are currently declining, supporting oil prices and reversing previous downward trends.

Second, the Red Sea crisis has increased logistics costs, directly raising import prices, especially for US consumers heavily reliant on Asian imports.

Third, policy uncertainties during the election cycle and rising trade protectionism will increase corporate costs, ultimately passing to consumers.

Combining these factors, the CPI trend in 2024 becomes more complex: after bottoming in Q1, a rebound is expected in Q2, and whether prices continue to decline in the second half depends on election results and geopolitical developments.

How Should Investors Respond to CPI Forecast Risks?

US CPI releases each month often trigger significant asset price swings, especially when data exceeds expectations. Investors need to recognize that CPI forecasts are not a linear downward process but full of twists and uncertainties.

Early marking of release dates, focusing on Core CPI rather than total CPI, and continuously monitoring leading indicators like crude oil inventories and freight indices can help investors better navigate the market shocks from inflation changes in 2024. Remember: The accuracy of CPI forecasts is often less important than understanding the logic behind the forecasts.