Money

Investors Warn of Underreported Inflation Risks in 2023

  • Revisions to consumer-price index (CPI) readings
  • Federal Reserve’s concern over inflation
  • Potential impact on financial markets

Introduction

Inflation revisions are usually not a major event, but last year’s revisions caused a stir in the financial market. As the Bureau of Labor Statistics prepares to release updated data on Friday, investors are eagerly awaiting the results. The revisions will cover the period between January 2019 and December 2023 and will update seasonal factors in the consumer-price index readings. There is anticipation over what these revisions will reveal, especially considering the potential implications for inflation. With the Federal Reserve closely monitoring the situation, Wall Street is on guard.

Main Content

The Significance of Inflation Revisions

Last year, the Bureau of Labor Statistics released revisions to the 2022 CPI readings, showing that inflation had not slowed down as much as initially thought in the final two months of the year. This sparked concerns among investors and policymakers. Now, with the release of the 2023 revisions, there is a fear that a similar situation could occur. Federal Reserve officials are particularly concerned about inflation and the need for confidence that it is on a sustainable downward path towards their 2% target.

Expert Analysis

Economists and market strategists have expressed their concerns about inflation risks in recent months. U.S. economist Michael Reid of RBC Capital Markets predicts moderate upside revisions to the latter months of 2023. However, he believes that the revisions will not significantly change the year-over-year pace of inflation. The preferred measure for both Reid and the Fed is the Personal Consumption Expenditures (PCE) index, which shows more improvement in inflation compared to the CPI.

Market Reaction

Financial markets have remained steady in anticipation of Friday’s data release. Stocks closed with gains on Thursday, and Treasury yields reached two-week highs. Investors are closely monitoring the situation, as any unexpected changes in inflation could have a significant impact on market dynamics.

Conclusion

As the Bureau of Labor Statistics prepares to release inflation revisions for the period between January 2019 and December 2023, investors are on edge. Last year’s revisions served as a wake-up call, highlighting the potential for inflation to be hotter than initially reported. With the Federal Reserve closely watching the situation, the financial market is bracing for any surprises. Friday’s data release will shed light on whether inflation was higher than expected in the final months of 2023. Investors and policymakers will closely analyze these revisions to gain insights into the future trajectory of inflation.

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