Hotter than expected US inflation tempers Fed rate cut expectations

investmentweek.co.uk:

According to the Bureau for Labor Statistics, the US Consumer Price Index fell to an annual rate of 3.1% in January, down from 3.4% in December. However, this figure came in higher than the 2.9% anticipated by economists.

According to the Bureau for Labor Statistics, the US Consumer Price Index fell to an annual rate of 3.1% in January, down from 3.4% in December. However, this figure came in higher than the 2.9% anticipated by economists.

On a monthly basis, US inflation rose by 0.3% in January, up from 0.2% the previous month and also higher than the 0.2% expected rise.

Market remains bullish on rates cuts despite US inflation uptick

Core inflation, which does not take into account fuel and energy prices, rose 3.9% over the last 12 months, the same increase as for the 12 months ending December. Month-on-month, the core index rose 0.4% in January.

Michelle Cluver, portfolio strategist at Global X ETFs, said shelter inflation was the «key point of disappointment» for markets, as shelter prices increased 6% year-on-year.

John Leiper, CIO at Titan Asset Management, said: «Markets were pricing in a 50% probability of a May rut cut, down from 95% two weeks ago. Odds have reduced further following publication of today's data.

»As a result, bond yields are rising, driven by the front end of the curve, and equity futures are down."

Federal Reserve holds rates steady as Jerome Powell dampens March cut hopes

Niel Birrell, CIO at Premier Miton Investors added the Fed will feel «vindicated» in the language it has been using around rates cuts, arguing there can be «little doubt that they are being pushed further out».

«We are not at the stage of worrying about inflation reaccelerating, but we are not out of the woods yet either,»