U.S. Inflation Rises 3% in January, Exceeding Expectations, Dampening Hopes for Interest Rate Cuts
U.S. Inflation Rises 3% in January, Exceeding Expectations, Dampening Hopes for Interest Rate Cuts
Consumer prices in the United States rose higher than expected in January, indicating that inflation has shown little sign of slowing down. This has diminished hopes for a near-term interest rate cut.
The U.S. Bureau of Labor Statistics reported on Wednesday that the Consumer Price Index (CPI) increased by 0.5% in January, surpassing December's 0.4% growth.
Over the 12 months leading up to January, the CPI rose by 3%, up from 2.9% in December.
Economists surveyed by FactSet had predicted a monthly CPI increase of only 0.3% and an annual CPI growth of 2.9%, but the actual figures came in higher than expected.
The Core CPI, which excludes volatile food and energy prices, rose by 0.4% in January compared to the previous month, also exceeding expectations.
The annual Core CPI increased by 3.3%, higher than FactSet’s forecast of 3.1%.
Economists had anticipated that this CPI report would show only a slight slowdown in inflation. However, the data indicates that prices in the economy are still rising, which may force the Federal Reserve (Fed) to delay interest rate cuts.
The inflation report shows that inflation remains far from the Fed’s 2% target, and there could even be arguments in favor of raising interest rates rather than cutting them.
Since the COVID-19 pandemic, inflation reports for January and February have typically shown higher figures.
At the beginning of the year, producers tend to raise prices, and the recent minimum wage hikes in 21 U.S. states may also be contributing to rising costs.
At the same time, a severe outbreak of avian flu has significantly impacted livestock across the U.S., driving prices higher.
For example, the national retail price of large, caged white eggs increased by approximately 25% in January compared to the previous month, according to the U.S. Department of Agriculture.
Summary:
- U.S. inflation in January exceeded expectations.
- This may force the Fed to delay interest rate cuts or even consider raising rates.
- Minimum wage hikes and avian flu outbreaks have contributed to rising prices.