Here comes CPI ...

The latest reading on inflation via the consumer price index is set for release at the bottom of the hour.

According to Bloomberg, economists estimate that headline CPI was flat in December compared to November, held down by gas prices. Excluding food and energy costs, they forecast that core CPI was 0.2%.

Compared to December 2014, the consensus forecast calls for a 0.8% increase on the headline, and 2.1% on a core basis.

The focus of markets and economists would be on how the Federal Reserve responds to the incoming data on inflation.

In a morning note to clients, BMO Capital Market's Aaron Kohli wrote,

"Until now, the Fed has been able to point to relatively healthy US data, with core pointing upwards ... Housing has been a source of strength for CPI and for the Fed to sound credible about potential hikes in the next few months requires continued strength in core CPI now that employment gains are likely to slow. Should we not see strength in core CPI today, it would only reinforce the market's view that another hike is further in the future than the Fed has suggested."

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