US Inflation Rises, Dampening Trump's Rate Cut Hopes
Despite a surge in inflation for the fourth consecutive month, former US President Donald Trump has called for the Federal Reserve to lower interest rates. The move comes as Trump announced new tariffs on steel and aluminum imports.
However, official data shows inflation reached 3% in January, increasing the likelihood that the Fed will not cut rates. Federal Reserve Chairman Jerome Powell reiterated that the central bank is in no rush to loosen monetary policy.
The Consumer Price Index (CPI) was initially expected to remain at 2.9% in December. However, rising food, fuel, and used car prices pushed it higher. Traders have now postponed their expectations for interest rate cuts.
Money markets now predict that the Fed will not lower borrowing costs until December at the earliest. US stocks declined upon opening, with the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite falling approximately 1%.
The CPI data also triggered a rise in the cost of US government borrowing, with the 10-year Treasury yield climbing 10 basis points to 4.63%. The value of the dollar strengthened, with the pound sterling depreciating 0.4% against the US currency.
Economists view the inflation increase as a barrier to rate cuts. Capital Economics' Paul Ashworth asserts that "rate cuts are off the table this year."
Trump, however, maintains his stance, stating that interest rates should be lowered to complement his tariff policies. He has previously expressed a desire to control interest rates himself and has threatened to remove Powell.
Despite Trump's remarks, experts doubt his legal authority to dismiss Powell. Powell, appointed by Trump in 2018, insists that the economy is strong and sees no need for immediate rate cuts.