NEW YORK (Reuters) – U.S. consumer prices increased more than expected in January amid rises in the costs of shelter and healthcare, but the pick-up in inflation likely does not change expectations that the Federal Reserve will start cutting interest rates in the first half of this year.
The consumer price index (CPI) increased 0.3% last month after gaining 0.2% in December, the Labor Department’s said on Tuesday. In the 12 months through January, the CPI increased 3.1%. That followed a 3.4% advance in December. Economists polled by Reuters had forecast the CPI gaining 0.2% on the month and rising 2.9% year-on-year. The annual increase in consumer prices has moderated from a peak of 9.1% in June 2022.
STOCKS: U.S. stock index futures turned 1.2% lower
BONDS: U.S. Treasury yields jumped after the data, with 2-year note last at 4.594%, and the 10-year note at 4.2790%FOREX: The dollar index turned 0.6% higher
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN
“A slightly hot CPI really sent a chill down the spine of investors. The Fed doesn’t have a coherent set of criteria for cutting, so for all we know this resets the clock. If cutting is a confidence game, we don’t know when enough progress is enough or whether mild setbacks undermine their confidence. No wonder bond volatility is elevated.”
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK
“It’s a hotter-than-expected report and it’s part of what the Fed has been alluding to when it says it’s too early to say that inflation has been beaten.”
“Inflation is in the pipeline, and this negates the any possibility of the Fed cutting rates in of March, and the hawkish Fed metric is likely to continue.”
“And as far as the market is concerned, obviously we see NASDAQ falling apart here. It’s negative news for the markets and negative news for the Fed.”
“If this keeps up with another month or two of inflation staying high, you can kiss a June (rate cut) goodbye and we’re probably looking at September.”
(Compiled by the Global Finance & Markets Breaking News team)
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