Hua Er Jie Jian Wen·2026-01-14 03:07Core Viewpoint - The December CPI data appears mild but is filled with unsustainable noise and statistical distortions, according to Deutsche Bank and Morgan Stanley. The true test will be the upcoming PCE data [1][3]. CPI Analysis - The December CPI data showed a year-over-year core CPI increase of 2.6%, the lowest since March 2021, and a month-over-month increase of 0.2%, both below expectations [1]. - Deutsche Bank highlighted that the CPI data is distorted, with significant downward pressure from abnormal declines in information technology goods and wireless phone services, which together lowered the core CPI by about 6 basis points [4][6]. - The trimmed mean CPI and median CPI, which exclude extreme values, were reported at 0.31% and 0.28% respectively, indicating stronger underlying inflation pressures [1][6]. PCE Forecast - Morgan Stanley warned that despite the lower-than-expected core CPI, their forecast for the December PCE price index suggests a month-over-month increase of 0.46%, significantly higher than the CPI performance [2][9]. - The divergence between CPI and PCE is attributed to the differing weightings of goods and services in the two indices, with PCE showing stronger price increases in categories that have higher weights [9][11]. Market Implications - The market is awaiting the PCE data to confirm the true inflation trend. If the PCE rebounds as expected, it will limit the Federal Reserve's ability to continue lowering interest rates [3]. - Deutsche Bank noted that the CPI data reflects a mix of distorted November data recovery and genuine weakness, suggesting the Fed will likely wait for more data before signaling further rate cuts [14]. Tariff Effects - Both Deutsche Bank and Morgan Stanley observed signs of tariff impacts on inflation data, with prices of tariff-sensitive goods rising again in December, indicating potential future consumer price increases [12].