This Week's US Inflation and Nvidia Earnings Release...Will Inflation Ease After 7 Months?

This week, Wall Street's attention is focused on U.S. inflation indicators. The U.S. Federal Reserve (Fed) has indicated that it will hold off on cutting interest rates until inflation declines further, leading investors to renew their interest not only in employment but also in inflation.

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According to the U.S. Department of Labor on the 23rd (local time), the core Personal Consumption Expenditures (PCE) price index for January will be released on the 28th.

The market expects, based on Bloomberg's aggregated data, that the January core PCE price index rose 2.6% year-over-year. This is a slowdown from the previous month (2.8%) and the lowest level in seven months since June last year (2.6%). The core PCE price index excludes volatile food and energy prices, allowing for an understanding of the underlying inflation trend, making it the Fed's most closely watched inflation indicator.

This is expected to partially ease market concerns that inflation will become entrenched due to recent rebounds in the Consumer Price Index (CPI) and inflation expectations.

The previously released January CPI rose 3% year-over-year, exceeding both the previous month's figure and market forecasts (both 2.9%). Inflation expectations also increased. According to a University of Michigan survey on the 21st, consumers expected inflation to rise 4.3% one year from now, the highest level since November 2023.

Anna Wong, an economist at Bloomberg Economics, said, "We expect the January core PCE inflation rate to slow to 2.6% year-over-year," adding, "The appeal of the 'Trump trade,' which bets on rising inflation, is likely to diminish."

Austan Goolsbee, President of the Federal Reserve Bank of Chicago, recently commented on the rise in consumer inflation expectations, saying, "It was not a good number, but it's just one month of data," and "It takes at least 2 to 3 months to calculate the figures." While concerns about prolonged inflation are emerging, he advised against placing too much significance on a single indicator.

However, since inflation still exceeds the 2% target and the slowdown remains sluggish, the Fed's cautious monetary easing stance is expected to continue. The possibility that former U.S. President Donald Trump's tariff increase policies could trigger inflation may also delay the Fed's resumption of rate cuts.

This week, U.S. economic growth figures will also be released. The Bureau of Economic Analysis (BEA) will publish the real Gross Domestic Product (GDP) growth rate for the fourth quarter of last year on the 27th, which is expected to show an annualized rate of 2.3% quarter-over-quarter, matching the advance estimate released last month. Although lower than the third quarter's growth rate (3.1%), the economy likely maintained solid growth supported by strong consumer spending.

Nvidia, the leading company in artificial intelligence (AI), will announce its fiscal 2025 fourth-quarter earnings a day earlier, on the 26th. This will be the first earnings report since the emergence of the Chinese AI startup DeepSeek. The market expects Nvidia's revenue to have increased 73% year-over-year to $38.26 billion, with adjusted earnings per share (EPS) rising 63% to $0.84. Demand for AI chips and CEO Jensen Huang's comments on DeepSeek will also be key points to watch.

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