Back At It Again – The January CPI Report
The last few months have given consumers hope about inflation finally exiting the US economy once and for all. 6 consecutive months of a slowdown in inflation has led the Federal Reserve to slow interest rate hikes, although Powell has had his persistent concerns about the threat of inflation even now. This sentiment was furthered by comments following an extremely strong January jobs report, which displayed an extremely strong labor market to the worry of the Fed.
If there was anything that could serve as the final nail in the coffin, it would be the January CPI report. Indeed, the Bureau of Labor Statistics provided the vital piece of data on Tuesday, and it wasn’t too inspiring. CPI rose by 6.4 percent from a year earlier, a slight cooldown but not as much as investors hoped. There weren’t many surprises regarding the data, but there are trends that can be noted. In the energy area, gas prices rose by 2.4 percent from December, and natural gas utility prices rose by 6.7 percent which was the largest increase in 7 months. For consumers, grocery prices were especially bad due to the inflation in food products like eggs and even carbonated drinks, rising by 11.3 percent from last year. Core inflation slowed slightly, rising by 5.6 percent from a year before, but it still sits at a level too high for the Fed’s liking. This all but confirms a rate hike in the upcoming Federal Reserve meeting, and it gives further warranting to hike rates in future meetings. Jerome Powell said himself that inflation is going to be persistent in our economy, and that a lot more will be needed to eliminate the threat, so there is a chance that we could kiss the soft landing goodbye.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.