Consumer prices in the United States increased by 0.5% in January, marking the fastest pace of inflation seen in nearly a year and a half. The rise was broad-based, with significant contributions from shelter, food, and gasoline prices. The Consumer Price Index (CPI) rose 3.0% year-on-year, with the core CPI—which excludes the volatile food and energy sectors—gaining 0.4% in January and advancing 3.3% over the last 12 months.
This surge in consumer inflation is likely to diminish hopes for potential rate cuts, as the Federal Reserve may be compelled to reconsider its monetary policy strategy in the face of rising prices. An employee checks pears at a 365 by Whole Foods Market grocery store ahead of its opening day in Los Angeles, U.S., May 24, 2016. The latest data appeared to rattle investors, with Wall Street coming under pressure.
The S&P 500 and Dow Jones Industrial Average each fell by about 1% after trading commenced in New York. The 10-year US Treasury yield, a key barometer for US economic expectations, climbed to about 4.629%.
January inflation complicates Fed strategy
Inflation soared globally three years ago as the pandemic disrupted economies and supply chains. It peaked at 9.1% in the US, the highest level in a generation. Although price growth has since cooled significantly, consumer prices have remained high.
The release of the latest inflation data has spurred speculation about how quickly the US Federal Reserve might cut interest rates. The Fed had previously raised rates aggressively to cool the economy and curb inflation. Many economists have warned that Trump’s tariff strategy could worsen inflation.
Despite promising action on the campaign trail, Trump has softened his stance since his election victory last November. In December, he admitted, “It’s hard to bring things down once they’re up. You know, it’s very hard.”
