Just tonight, the annual overhaul of the US CPI, Powell specially highlighted .

Last year, the US CPI "annual overhaul" triggered violent turmoil in the policy outlook and markets, will this year's correction be unexpected again? At 21:30 Beijing time on Friday, the U.S. Bureau of Labor Statistics will release a seasonally adjusted revision to monthly inflation, and Wall Street and economists are closely watching this key data. The annual revision of the CPI index usually does not attract much attention, but last year it was revised sharply upward, which surprised the market and cast doubt on the progress of reducing inflation. Before the release of this revision, the Federal Reserve also spoke successively to "knock on the key". Fed Chair Jerome Powell almost never stressed that he expects a specific economic data, but he said at the latest FOMC meeting that he would be watching the CPI inflation revisions closely; Fed Governor Waller also mentioned the importance of the CPI revision in a speech last month. The market widely expects that Friday's CPI correction will not fluctuate sharply and will hardly affect the Fed's monetary policy outlook. However, if the revision contains surprising information, then the impact on Fed pricing should be greater than that of inflation fixing.

As interest rate cuts approach, CPI revisions are concerningThe U.S. Bureau of Labor Statistics regularly adjusts monthly CPI data to remove seasonal interference from the data, such as those related to holiday shopping. By smoothing out these factors with seasonal adjustments, it is possible to make meaningful comparisons of inflation in different months of the same year. Last year's correction was a sudden change in the tone of inflation and the outlook for interest rates. Last year's preliminary data showed that the core CPI index, which excludes food and energy, was 3.5 on an annualized basis in the last three months of 20221%, down from 8% in the same period in 2021. However, this positive signal is false, 3The 1% increase was eventually revised up to 43%, and the core CPI for January, released four days later, was as high as 5 year-on-year1%。BofA noted that following last year's release, there has been a more pronounced impact on the pricing of Fed policy, with data showing that the overnight index swap rate at the beginning of 2024 was about 10 basis points**, indicating that the Fed has made less progress in reducing inflation than previously expected.

For the first time in a year, Friday's upcoming data has been in the spotlight, and the risk of another sharp correction has scared investors. Fed Chair Jerome Powell doesn't often emphasize a specific economic data he expects, butAt his most recent FOMC meeting, he mentioned that he would be watching closely the upcoming CPI inflation revision

Recall that a year ago, when inflation looked like it was coming back down quickly, the correction of seasonal factors changed the trend. In mid-February, we will receive the CPI report for January and the annual CPI revisions for 2023This could change the inflation landscape. I hope the revised values confirm the progress we're seeing, but the policy is based on data and not hope.

Will this correction surprise again? Some analysts believe that Friday's CPI correction will not "scare" the market. Bank of America economist Michael Gapen in a report on January 25 did not expect a repeat of last year's situation, and this correction will not affect the monetary policy outlook

In our sample, seven out of ten years of data were revised downward, and the fourth quarter of 2022 was clearly an outlier compared to previous years, with an absolute average of only 26 basis points, compared to a monthly revised average of 9 basis points for the fourth quarter of 2022.

Last year's CPI correction was an outlier, and from a purely statistical point of view, the likelihood of another outlier in the upcoming revision is low.