Inflation increased more than expected in January, ensuring further motivation of the federal reserve to maintain interest rates.
. Consumer price indicatorThe wide measure of the costs of goods and services throughout the US economy accelerated the seasonally corrected 0.5% per month, which gives an annual inflation rate of 3%, Bureau of Labor Statistics said on Wednesday. They were higher than the appropriate estimates of Dow Jones at 0.3% and 2.9%. The annual rate was 0.1 percentage points higher than in December.
Excluding unstable food and energy prices, CPI increased by 0.4% per month, causing a 12-month inflation rate at 3.3%. Compared to appropriate estimates for 0.3% and 3.1%. The annual basic rate also increased by 0.1 percentage from December.
Markets have fallen after messages, from timely contracts related to Dow Jones Industrial, the average moves by over 400 points, while the yields of the bonds increased significantly.
“Fed” Wait and see “will wait longer than expected after the hot January CPI inflation report,” said Josh Jamner, an investment strategy analyst at Clearbridge Investments. “This report places the last nail in the casket for the speed cutting cycle, which we think is over.”
BLS said that shelter costs have become a problem for inflation, increasing by 0.4% per month and accounts for about 30% of all growth. As part of the metric category, in which house owners estimate what they could get if they rented their homes, increased by 0.3% per month and increased by 4.6% per year.
“The costs of shelter are still the main driving force of basic inflation, because higher mortgage rates pushes more Americans into the rental market, at which freedom rates are almost record -breaking,” said Erik Norland, chief economist from CME Group. “It seems that traders believe that today's data make additional Fed cuts less likely than they expected before.”
Food prices increased by 0.4%, pushed by a 15.2% increase in the prices of eggs related to current problems with bird flu, which forced farmers to destroy millions of chickens. The office announced that it was the largest increase in egg prices since June 2015 and was responsible for about two -thirds of food prices at home. Egg prices have increased by 53% over the past year.
Non -alcoholic drinks have recorded an increase of 2.2%in the last 12 months, while in January tomatoes have dropped by 2%, and other fresh vegetables dropped by 2.6%.
The prices of new vehicles were flat, but used cars and trucks recorded an increase of 2.2%, and motor vehicle insurance increased by 2%, which increased the annual profit to 11.8%. Energy prices increased by 1.1%because gas prices have increased by 1.8%.
The report appears the day after the Fed chair Jerome Powell I pointed out that the central bank can be suspended for some time when it comes to interest rates. Powell told members of the Senate Banking Commission that he thinks that the Fed does not have to hurry with lower rates because he assesses the progress of inflation and as the president Donald Trump He continues plans to apply tariffs in relation to imports.
According to the CME group, markets largely expect the FED to remain for a long time and pushed the next probability of lowering the rate to September after the CPI report. Traders also suggested about 70% probability that the FED will reduce only once this year.
However, Trump is still pressing at lower rates. In a post about social truth, about half an hour before the release of CPI, the president said: “interest rates should be reduced, something that will go hand in hand with the upcoming tariffs !!!”
However, the CPI edition may complicate the further alleviation of monetary policy.
The price jump ate employees, because the CPI increase was completely balanced by 0.5% higher in average hourly profits, BLS said in a separate version.
Correction: Josh Jamner is an analytical of the investment strategy at Clearbridge Investments. The earlier version incorrectly wrote his name.