U.S. inflation rose 3.1% in January, a sharper-than-expected rise that further heightened doubts about whether the Federal Reserve will start cutting interest rates this spring.
Last month’s consumer price index, which measures changes in the cost of everyday goods and services, beat economists’ expectations of 2.9%, FacfSet said.
Core CPI, which excludes volatile food and energy prices, rose 0.4% to 3.9% in January, after rising 0.3% in December. The numbers, a closely watched measure of long-term trends among policymakers, also exceeded expectations from FactSet economists.
Dow futures were poised to fall early Tuesday as traders began to ease their belief that the Fed would start cutting interest rates sooner rather than later.
The latest inflation figures indicate a cooling down from December’s 3.4% rise, which was stronger than expected, and the first of three long-awaited rate cuts this year could come as early as March. Wall Street’s expectations for this have weakened.
“The question is whether May 1 remains a possibility if the next set of inflation-related indicators are not lower than expected,” said Quincy Crosby, chief global strategist at LPL Financial.
“This could easily be a one-off. But for all the people who are saying interest rates are too high, he has to cut rates now,” said the Independent Advisor Alliance chief executive. Investment Director Chris Zaccarelli spoke about Federal Reserve Chairman Jerome Powell. “What are we dithering about? Here’s why. This is exactly what Mr. Powell was concerned about.”
The Bureau of Labor Statistics attributed the CPI increase to the shelter index, which rose 0.6% month over month and accounted for two-thirds of the month’s total increase. The food index rose 0.4% in January, exceeding the 0.2% rise in December.
Meanwhile, the gas index fell sharply by 3.3%, offsetting gains in the electricity and natural gas indexes, federal officials said. As of Tuesday, the average price of a gallon of gasoline in the United States was $3.23. AAA data.
The Bureau of Labor Statistics’ latest CPI report highlights that Americans are cash-strapped and still trading at much higher retail prices than before the pandemic.
Hopes for a rate cut were also hurt by January jobs data that showed a buoyant labor market, with U.S. employers adding a staggering 353,000 jobs last month.
The figure was higher than economists’ expectations of 185,000, as the unemployment rate remained flat at 3.7% for the third consecutive month.
January’s employment report comes as central bank authorities unanimously decided to keep interest rates at 5.25-5.5%, their current 22-year high. It was the first major economic indicator since the latest policy meeting.
Subhadra Rajappa, head of U.S. rates strategy at Société Générale, said that given the employment data and consumer price index, the Fed still “doesn’t have a consistent benchmark for rate cuts, so as far as we know… This will reset the clock.”
“If cuts are a confidence game, we don’t know when enough progress will be enough, or when a minor setback will undermine their confidence.”
Meanwhile, President Joe Biden, in a video posted to X ahead of Super Bowl III, addressed the issue of “shrinkflation,” where companies reduce the size of their products while keeping prices the same.
Biden called the practice a “rip-off.”
I’m calling on companies to stop this. “Now is the time to make sure companies do the right thing,” he said, without offering any solutions or policies to address the practice.
In December, Sen. Bob Casey released a report showing the impact of shrinking product sizes on everything from toilet paper to Oreos.
According to the report, household paper products are up 34.9% per unit compared to January 2019, with approximately 10.3% of the increase due to producers reducing roll and package sizes. It pointed out.
Prices for snacks like Oreos and Doritos rose 26.4% over the same period, with contraction accounting for 9.8% of that increase, the report said.
A Reuters/Ipsos poll released last month found that while inflation appears to be slowing, 22% of poll respondents said they are worried about the U.S. as it continues to struggle with inflation and other fallout from the COVID-19 pandemic. The economy continues to be the biggest concern for all citizens. .
Since taking office, Biden has called for lower prices at supermarkets, asked drug companies to lower the cost of insulin and hotel chains to lower fees, and sought to diversify the meat packaging industry as beef prices soared after the pandemic. Ta.
