GGUY - STOCK.ADOBE.COM PHOTOInflation eased year-over-year in January, but not as much as analysts expected, creating a hurdle for the Federal Reserve to clear when deciding if it will cut rates.
The U.S. Bureau of Labor Statistics reported that the consumer price index increased 0.3% in January, which was up slightly over December’s 0.2%. During the last 12 months, the All Items Index rose 3.1% before seasonal adjustment, compared with a 3.4% annual rate in December.
The 3.1% increase is higher than the predicted 2.9%, which according to the The Wall Street Journal was a disappointment for investors hoping the Federal Reserve will cut rates sooner rather than later.
Stocks fell and bond yields rose after the index was released. The Dow Jones Industrial Average dropped 500 points, and the S&P 500 fell more than 1%, bringing it below the 5,000 mark it surpassed for the first time Feb. 9. The yield on a 10-year Treasury Note rose to 4.28%, achieving its highest level in more than two months.
The inflation report could underscore why officials have suggested that the pace of improvement over the past six months could overstate progress containing price pressures. They have said they aren’t ready to look at rate cuts at the next meeting, March 19-20, because they want to see more evidence that inflation is nearing the desired 2% target.
Some officials said they want to see evidence of a slowdown in price pressures beyond such goods as used cars, which have seen prices drop in the last year. Prices for groceries are also still well above prepandemic rates.
