New Inflation Data Points to Elevated Prices, Complicating Fed's Path
The latest inflation data reveals a rise in consumer prices, with headline CPI increasing by 3.0% year-over-year in January. Core inflation, excluding volatile food and energy prices, also rose 0.4% over the previous month and 3.3% annually.
While inflation has decelerated, it remains above the Fed's 2% target. Core inflation has been stubbornly high due to sticky costs in shelter, insurance, and medical care. Used car prices have also seen a significant uptick in recent months.
Federal Reserve Chairman Jerome Powell has acknowledged the "bumpy" road ahead for inflation. The Fed is closely monitoring price developments and the impact of President Trump's trade policies.
Trump's announcement of tariffs on steel, aluminum, Mexico, Canada, and China has raised concerns about a potential resurgence of inflation. This could complicate the Fed's interest rate decisions this year.
Traders have scaled back expectations of a Fed rate cut and stock futures have sold off following the release of the inflation data. Investors are closely watching the Fed's response to these latest developments.