Chances are the consumer price index will be a sleeper for markets Tuesday, but if it's not, watch for interest rates to spike and stocks to sell off.
The CPI is expected to come in at 0.2 percent both for headline inflation and core, which excludes energy and food, according to Thomson Reuters. That compares with last month's report of higher-than-expected 0.5 percent gain in headline inflation in January and an increase of 0.349 percent on core, the most on a monthly basis since 2005.
"We're expecting it to be lower than last month. I don't think people are expecting much volatility around it, but you never know," said Justin Lederer, fixed income strategist at Cantor Fitzgerald. "It's a key component for the Fed."
The Fed meets next week, and it's expected to raise interest rates by a quarter regardless of what the latest consumer inflation data says. But markets are on the watch for anything hotter than expected. Rising inflation could get the Fed changing its forecast and moving faster than expected to increase its fed funds target range.
"I think the market hinges on the CPI now more than it does on payroll numbers. You think about what the Fed has in its calculus with the dual mandate. No matter how many good employment reports you get, you know the same thing, you're at or near full employment," said Tom Simons, money market economist at Jefferies.
"Inflation is a different animal," he said. "There's a lot of different opinions on what the recent data means. It's either that we're on the path toward a certain target or we're not."
The February employment report on Friday sent stocks rocketing, with 313,000 non-farm payrolls but a muted wage gain and a downward revision to January's wages.
But the CPI is not expected to be too dramatic, and the core, expected at 1.8 percent, is still below the Fed's 2 percent inflation target. Headline inflation is expected to be up 2.2 percent, up from 2.1 percent last month, according to Thomson Reuters.
Kevin Cummins, senior U.S. economist at NatWest Capital Markets, said core CPI should reach the Fed's 2 percent target in the April report, and last year's weak data will make for easy comparisons for a number of months.
"We saw a month-to-month decline in the core. That won't fall out of the calculation until you get the March data this year, and you'll rise from 1.8 to 2.1. ... We have core CPI creeping a little higher throughout the year," he said. He said CPI should reach the Fed's 2 percent target by April and then move sideways for the rest of the year.
Energy bumped up January's headline CPI, and it should be more muted in February's number. Cummins expects the 0.2 percent rise expected by the consensus.
As for the Fed, the CPI won't make much difference for next week's meeting. If it should be way off the mark, it could impact its longer-term thinking.
"I don't think it's necessarily going to be a game changer. I don't think it necessarily changes the outcome," he said. "Of course, if you did see a 0.3 or 0.4 on the core, you would probably start to add to the evidence that you're starting to see a little more inflation than we thought."
Besides CPI, at 8:30 a.m. ET, there is the NFIB small business survey at 6 a.m. ET. The Treasury auctions $13 billion in 30-year bonds at 1 p.m.