Inflation was higher than expected in January, according to the Bureau of Labor Statistics’ consumer price index report released on Wednesday morning. The report showed that consumer prices rose 0.5% from December to January on a seasonally adjusted basis, worse than estimates of a 0.3% month-over-month rise. Headline annual CPI inflation was 3% last month, compared to the consensus economist forecast of a 2.8% price increase from January 2024 to January 2025.
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
Core inflation, which excludes price changes in the often volatile food and energy categories, increased 3.3% year-over-year in January, higher than forecasts of 3.1%. Core prices rose 0.4% from December to January, compared to estimates of 0.3%. Egg prices played a significant role in the rising cost of groceries for Americans.
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
The price of eggs rose 15.2% from December to January on a seasonally adjusted basis and increased 53% from January 2024 to January 2025, largely due to an outbreak of bird flu affecting the national supply of eggs.
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
Inflation outpaces forecasts in January
This surge helped boost the consumer price index’s food-at-home sub-index to 1.9%, its highest reading since October 2023.
The hotter-than-expected CPI report caused significant sell-offs in both bond and stock markets, diminishing prospects for lower interest rates. Each of the three major U.S. stock indexes—the Dow Jones Industrial Average, the S&P 500, and the Nasdaq—fell about 1% in early trading, while 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,” Sameer Samana, senior global markets strategist at Wells Fargo Investment Institute, wrote in emailed comments.
Investor hopes for a rate cut at the Fed’s next meeting all but evaporated, as the market-implied odds of a March cut declined from 5% to less than 1% after the report, according to CME Group data. In response to the inflation report, President Donald Trump reiterated his call for the Federal Reserve to lower interest rates, which he argues would complement his upcoming tariff policies. However, it is worth noting that interest rate decisions are determined by the Federal Reserve, not the president.
