Investors reevaluated their expectations for Federal Reserve interest rate cuts on Wednesday after the U.S. released a higher-than-expected January inflation reading, which Euro shook financial markets. In January, the headline Consumer Price Index (CPI) increased 3% year over year, up 0.1 percentage points from December and above the 2.9% increase predicted by economists.
The US annual inflation rate increased for the third time in a row, indicating that the disinflationary trend may have paused or possibly reversed. The CPI increased 0.5% from December, topping predictions of 0.3% and was the fastest monthly rise since August 2023, indicating that price pressures were more noticeable in the monthly figure.
Inflation remained stuck in key components even as the cost of food and energy increased, with fuel oil rising 6.2% and eggs rising 15.2% over the month. Excluding volatile food and energy prices, core inflation increased 3.3% year over year, which was marginally higher than December’s 3.2% and higher than the 3.3% forecast. Core CPI increased by 0.4% on a monthly basis, exceeding the 0.3% prediction.
As he presented the Fed’s Semiannual Monetary Policy Report to the US Congress on Wednesday, Federal Reserve Chair Jerome Powell admitted that inflation is still “somewhat elevated.
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