Core consumer prices rose last month while headline readings declined, adding further complexity to the Fed’s fight against inflation.
Updated at 8:47am EST
US inflation eased at a slower-than-expected pace last month, data from the Bureau of Labor Statistics showed Thursday, signaling the Federal Reserve’s reluctance to declare and end its fight against inflation is supported by events in the broader economy.
The general consumer price index for the month of January was estimated to have risen 6.4% from last year, matching the 6.4% pace recorded in December and largely in line with the consensus forecast from Street.
On the month, inflation rose 0.5%, the BLS said, compared with a revised reading of 0.1% in December and a June high of 1.3%. Street forecasts had projected an acceleration of 0.5%.
So-called core inflation, which excludes volatile components such as food and energy prices, rose 0.4% for the month and 5.6% for the year, the report said, with the annual reading topping forecasts for Street.
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On Wall Street, US stocks reacted to the expected readings by paring earlier gains, with futures linked to the S&P 500 indicating an opening bell drop of 5 points and those linked to the Dow Jones Industrial Average priced lower. of a drop of 30 points.
Benchmark 10-year Treasury yields were little changed at 3.701% in volatile trading, while 2-year bonds settled at 4.501%. The US dollar index, which tracks the dollar against a basket of its global peers, was down 0.60% at 102.722.
He CME Group FedWatch it is now pricing in an 87.8% chance of a 25 basis point Fed rate hike on March 22, down from 90.8% last week, with the odds of a follow-on hike in May, either 25 or 50 basis points, set at around 80%.
Earlier this month, Federal Reserve Chairman Jerome Powell said the January jobs report, which showed a net gain of 517,000 new jobs, “shows why it will take a significant period of time” to bring domestic inflation under control. .
“The reality is that if we continue to get strong labor market reports or higher inflation reports, we may have to raise rates more” than is now expected,” Powell said, adding that it would likely take a year to bring Headline inflation returned to the Fed’s 2% target, a target he said would stay firmly in place given what he described as “structural” shortages in the labor market.
“The job market report underscores the message I sent during last week’s press conference,” Powell said. “There was an expectation that inflation would go away quickly and smoothly, but I don’t think that will be the case. It will take some time.”
