The U.S. Bureau of Labor Statistics released the Consumer Price Index (CPI) report for January on Wednesday morning. The report showed that inflation was higher than expected last month. Headline annual CPI inflation was 3% in January.
In addition to remarks from several Federal Reserve officials, the weekly look ahead for the global economy and markets includes:
The minutes of the Fed’s January policy meeting;
The final UMich sentiment survey data for January;
UK wage and CPI inflation data; and…— Mohamed A. El-Erian (@elerianm) February 16, 2025
This was higher than the 2.8% increase economists had predicted. Consumer prices rose 0.5% from December to January on a seasonally adjusted basis. This was also worse than the 0.3% month-over-month rise that was estimated.
A Bloomberg chart showing developments in four measures of consumer price inflation in the US. #economy #inflation #markets pic.twitter.com/WP1xR1WGA7
— Mohamed A. El-Erian (@elerianm) February 16, 2025
Core inflation, which excludes price changes in food and energy, increased 3.3% year-over-year in January. This was higher than the forecasted 3.1%. Core prices rose 0.4% from December to January, compared to estimates of 0.3%.
Inflation is draining the pocketbooks of those just trying to put food on the table.
That’s why in Congress, I remain laser-focused on bringing costs down, lowering taxes, and making life more affordable for hardworking families. https://t.co/FlDXBC1KZb— Rep Josh Gottheimer (@RepJoshG) February 15, 2025
The price of eggs was a notable contributor to the inflation increase. Egg prices soared 15.2% from December to January on a seasonally adjusted basis. They were up 53% from January 2024 to last month.
This was due to the impact of bird flu on the national egg supply. The egg price increase boosted the CPI’s food at home annual inflation sub-index to 1.9%. This was its highest reading since October 2023.
The government stated that this was the largest increase in egg prices in 10 years.
Higher January inflation dampens markets
Eggs contributed roughly two-thirds of all grocery inflation for the month.
The stock and bond markets reacted negatively to the hot inflation report. It dimmed prospects of lower interest rates. The Dow Jones Industrial Average, S&P 500, and Nasdaq each fell about 1% in early trading.
Yields for the benchmark 10-year U.S. Treasury bond rose about 10 basis points to a three-week high. The hotter-than-expected CPI confirms investors’ anxiety regarding too-hot inflation that will keep the Fed on the sidelines,” commented Sameer Samana, senior global markets strategist at Wells Fargo Investment Institute. Headline inflation was 2.9% and core inflation was 3.2% the previous month.
This was in line with economist forecasts. Inflation remains above the widely accepted 2% target. However, it has come down considerably since peaking at a four-decade high of 9.1% in 2022.
January marked the seventh consecutive month with inflation below 3%. But with inflation still above the ideal rate, the Federal Reserve has refrained from further interest rate cuts for now. This is keeping borrowing costs at a historically high level.
President Donald Trump criticized the inflation rates on his Truth Social platform, labeling them “BIDEN INFLATION UP.” Trump has previously called for interest rate cuts. However, these are determined by the Federal Reserve, not the president.
