On Friday, the U.S. Bureau of Labor Statistics released revised seasonal adjustments for monthly inflation data, an "annual overhaul" that Wall Street and economists have been closely monitoring.

The revised data showed that the annualized increase in the U.S. core CPI for the fourth quarter remained unchanged at 3.3%. The month-over-month increase in the U.S. CPI for December was adjusted down from 0.3% to 0.2%.

These results largely aligned with market expectations. Analysts had predicted that the CPI revisions would not exhibit dramatic fluctuations and were unlikely to impact the Federal Reserve's monetary policy outlook.

This calm revision will likely provide some relief to Federal Reserve officials who are looking for more evidence that inflationary pressures are continuing to subside before deciding to begin cutting interest rates. The rapid slowdown in U.S. inflation in the latter half of last year had left Fed officials skeptical about whether such quick progress could be sustained.

Industry insiders noted that Friday's data reinforced the market's view that the Federal Reserve has made significant progress on inflation, suggesting that rate cuts could be on the horizon, if not in March, then possibly in May or June.

The U.S. Bureau of Labor Statistics regularly adjusts monthly CPI data to eliminate seasonal factors that could distort the data, such as influences related to holiday shopping. Seasonal adjustments help make meaningful comparisons of inflation across different months within the same year.

Annual revisions to the CPI index typically do not attract much attention. However, last year's significant upward revisions had taken the market by surprise and cast doubt on the progress in reducing inflation, making Friday's latest data highly anticipated. Ahead of the revised figures' release, Federal Reserve officials had also made pointed remarks. Fed Chair Jerome Powell rarely emphasizes his anticipation for specific economic data, but he mentioned at the most recent FOMC meeting that he would be closely watching the CPI inflation revisions. Fed Governor Christopher Waller also highlighted the importance of the CPI revisions in a speech last month.

The U.S. is set to release CPI data for January next Tuesday, with expectations pointing to a 0.3% month-over-month increase in core CPI for the third consecutive month, indicating a slight uptick in inflation.

Market Reaction

Following the data release, futures for the three major U.S. stock indices saw modest gains, with Dow Jones futures up 0.25%, S&P 500 futures up 0.35%, and Nasdaq futures up 0.41%.

Yields on 10-year U.S. Treasury bonds fell to 4.146%.

Spot gold briefly rose by $10 to $2,035 per ounce, reaching $2,030.37 per ounce, although the gains were later pared back.