#CPIWatch

Will Sticky Inflation Derail Fed Cuts and the 2026 Stock Rally?

The closely watched US January CPI report comes out on Friday morning.

Headline annual inflation and core CPI are both seen rising 2.5%.

Here’s what to watch and how markets could react.

The report, originally slated for earlier in the week but postponed due to the partial government shutdown, comes on the heels of a surprisingly strong January jobs report that added 130,000 nonfarm payrolls and ticked the unemployment rate down to 4.3%.

What to Expect

Analysts predict a 0.3% month-over-month rise in headline inflation, translating to a 2.5% year-over-year increase, down from December’s 2.7% reading. This would mark the lowest annual rate since May 2025.

Bottom Line

In short, Friday’s January CPI release isn’t just another data point; it’s a key input into the Fed’s rate‑cut calculus and a potential inflection point for risk assets. A cooperative number keeps the soft‑landing, gradual‑cut story intact. A hotter‑than‑expected print could reset those expectations quickly.

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