WASHINGTON — The Bureau of Labor Statistics released January CPI at 3.1% Wednesday morning, prompting Federal Reserve communications staff to retrieve the word “bumpy” from cold storage and pre-load it into Chair Jerome Powell’s next six public remarks.
The print, two-tenths hotter than consensus, was driven by shelter, auto insurance, and a line item that the BLS now refers to in internal correspondence as “eggs, again, sorry.”
On the 38th floor of a midtown tower, a rates trader watched the number cross his terminal at 8:30:00.4 a.m., set down a Sweetgreen Harvest Bowl he had begun assembling at 8:27, and softly said the word “okay” in a tone that moved nine basis points by itself.
“This is broadly consistent with our base case, which is that the base case will be revised,” said Maren Cassel, head of US rates strategy at Beacon Strategy, in a note circulated to clients before most of them had logged on. “We continue to expect cuts in 2026, in the sense that we are continuing to expect them.”
Fed funds futures repriced within minutes from three cuts to two cuts to one cut to a 4:15 p.m. desk note titled “Cuts: A Postmortem,” which one reader described as “bleak but extremely well-formatted.”
The two-year yield jumped eleven basis points, the ten-year jumped seven, and the term “soft landing” appeared in zero sell-side notes for the first time since November, having been quietly replaced industry-wide with “landing of some kind.”
Powell, scheduled to speak Thursday at an economic club lunch where the chicken is always slightly dry, is expected to describe the path forward as “bumpy,” “data-dependent,” and “not a straight line” — the third phrase having been workshopped in to replace “uneven” after the older formulation focus-grouped poorly with regional bank presidents.
The White House, asked for comment, said inflation was both lower than it was two years ago and the fault of the previous administration, the current Federal Reserve, and avocados.
The next CPI report drops March 12. Powell is expected to call it bumpy.