US inflation faces a key test! February CPI data may remain stable, but fear it will be the calm before the geopolitical "storm".

One month after the US Bureau of Labor Statistics released the relatively mild Consumer Price Index (CPI) data for January, the agency will announce the data for February on March 11th. Investors will get an update on the latest inflation situation in the US from this upcoming data, although the recent geopolitical tensions and the resulting increase in oil prices are expected to reflect in the March CPI data. The market currently expects that the overall CPI in the US will increase by 0.2% in February, staying flat from the previous value; and the core CPI is expected to increase by 0.2% in February, lower than the previous value of 0.3%. The data shows that the US CPI rose by 2.4% year-over-year in January, lower than market expectations of 2.5% and the previous value of 2.7%; it also increased by 0.2% month-on-month, lower than market expectations of 0.3% and the previous value of 0.3%. The core CPI, excluding volatile items like food and energy, increased by 2.5% year-over-year, meeting market expectations, lower than the previous value of 2.6%; and it increased by 0.3% month-on-month, also meeting market expectations, higher than the previous value of 0.2%. As usual, the housing index (+0.2%) contributed to a large portion of the month-on-month increase in the US CPI in January, while the energy index (-1.5%) helped to lower the overall inflation level. However, there was a significant increase in service industry inflation - the month-on-month increase in core service industry inflation, excluding housing, was 0.56%, the largest increase since January last year. The food index (+0.2%) still remains above the level matching the Federal Reserve's 2% inflation target. Additionally, the transportation services index saw an increase, including gasoline, insurance, maintenance, and public transportation costs. In the January CPI report, the medical services index saw a 3.9% year-over-year increase. Investors expect this indicator to continue rising in February. The New York Fed pointed out that higher health insurance costs are restraining wage growth. However, Federal Reserve Chairman Powell still believes that Americans can offset the impact of inflation eroding disposable income through wage growth. Energy service prices may rise again in February - the index increased by 0.2% in January, with a year-over-year increase of 7.2%. In order to prevent consumers from attributing rising energy costs to AI data centers, the Trump administration has pressured technology companies to bear the electricity costs of AI data centers. Furthermore, it is expected that the prices of used cars and trucks will continue to decline in February, as they did in January, contrasting with the rise in prices of new cars. With oil transportation through the Strait of Hormuz being blocked, impacting global crude oil supply, gasoline prices have increased by 15% to 20%. In addition, the rise in gasoline prices also includes the annual switch from winter gasoline to summer gasoline. Summer gasoline production costs are higher, so consumers should be prepared for the trend of rising oil prices. This will weaken demand for both new and used cars. It is worth mentioning that the stock market is forward-looking. Therefore, investors should not expect an overreaction from the market to the upcoming CPI report. Instead, the market will continue to monitor the level of tension in the Middle East. Additionally, concerns about inflation caused by disruption in oil transportation through the Strait of Hormuz and rising oil prices will also influence market trends in the short term.