Is U.S. CPI going to start a retaliatory rebound?

**Source**: Wall Street Insights

**Author**: Zhao Ying

Morgan Stanley expects a notable rebound in the U.S. core Consumer Price Index (CPI) for December, with a month-on-month (MoM) increase of 0.36%—far exceeding the 0.08% average recorded in October and November. This rebound is mainly attributed to statistical distortions caused by the government shutdown. Meanwhile, the December data will serve as a critical window to verify tariff pass-through effects: tariffs have already lifted core inflation by a cumulative 35 basis points so far this year, and this figure is projected to rise to 45 basis points. Strong data will likely be discounted by the market as a result of "statistical distortions," whereas weak data could send a strong signal of cooling inflation.

Affected by technical statistical factors, the U.S. CPI for December may stage a sharp rebound, and the December inflation data will also be a key gauge to assess the pass-through of U.S. tariff effects.

According to Zhuifeng Trading Desk, Morgan Stanley forecasts a significant rebound in the U.S. core CPI for December, with a MoM gain of 0.36%, well above the 0.08% average in October-November. This rebound stems primarily from statistical distortions during the government shutdown, rather than a genuine uptick in inflationary pressures.

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