Recently, I reviewed the historical records of U.S. inflation data and discovered some quite interesting patterns.

Many people focus on the timing of the U.S. CPI release, but what's more important is understanding the underlying logic. CPI is usually announced on the first business day of each month, and this data attracts global investors because it directly influences Federal Reserve decisions, which in turn shake the entire asset market.

I noticed that many people tend to confuse the concepts of CPI, core CPI, and PCE. Simply put, CPI includes food and energy, while core CPI excludes these more volatile items. PCE, although released a bit later, uses chain-weighted methodology, which better reflects substitution effects in consumption, and that's why the Fed pays more attention to PCE. As for month-over-month and year-over-year rates, the annual rate can more stably reflect actual trends, excluding seasonal disturbances.

By analyzing the composition of the U.S. CPI, we can identify key points for analysis. Housing accounts the largest share (30-40%), followed by food and beverages (13-15%). These two major components largely determine inflation trends. I previously saw data indicating that from the 1990s to today, the U.S. experienced four major CPI swings, each corresponding to different economic events—savings and loan crisis, dot-com bubble, subprime mortgage crisis, and later, the pandemic.

Particularly noteworthy is the 2020 cycle. The pandemic caused economic standstill, leading to a rapid decline in CPI, but after massive Fed stimulus, CPI surged to a high point in June 2022. This shows how much global logistics impact inflation. Recently, the Red Sea crisis has disrupted logistics again, with shipping rates on Asia-Europe routes doubling. Although the impact is less than the "Ever Given" incident, regional logistics disruptions will eventually transmit to consumer prices.

Looking back at the CPI trend in 2024, it was mainly influenced by the U.S. economy itself and geopolitical factors. The IMF forecasted a 2.1% GDP growth for the U.S. in 2024, ranking among the top major economies, so inflation levels are unlikely to decline sharply. Additionally, declining crude oil inventories support oil prices, and political uncertainties during election years led us to expect CPI to bottom out in Q1, rebound in Q2, and decline again in the second half.

In retrospect, this judgment largely aligns with reality. Market attention to CPI release timing has always been high because it’s the earliest published inflation data, often causing significant volatility. In comparison, PCE, although released slightly later, is also crucial since it forms the basis of Fed policy decisions and cannot be ignored.

Simply put, to grasp the pulse of inflation changes, one should monitor both the CPI year-over-year rate and the PCE year-over-year rate. Especially, the timing of CPI releases often triggers market fluctuations. This is very valuable for asset allocation decisions.