The US inflation has accelerated in January as shown by new data. Consumer prices in the country rose higher than expected and the data could pave the way for higher interest rates later this year. The consumer price data released also shows that price increases cut across a number of sectors. Gasoline, clothing, medical care, and food saw the highest volatility. The latest inflation numbers come a few days after another report on US wage growth was released. The report noted that there was accelerated wage growth in the country. The wages report was also blamed for the days of volatility that were witnessed in the US stock market.
The Consumer Price Index grew by 0.5%. This was higher than the expected rise of 0.3%. It’s already clear that the Federal Reserve will increase interest rates in the near future and many experts are already bracing themselves for a rate hike, especially after the release of this latest information.
However, the new inflation data appears to have had a very minimal impact on the stock market. Although bond yields climbed higher after the news, the response of other financial markets was relatively muted. The Dow, S&P 500, and Nasdaq all remained very positive despite a slow start.
The Consumer Price Index is released by the Commerce Department. Although the index is an important indicator of inflation, it’s not usually used by the Federal Reserve. However, it provides an idea as to where the rate of inflation will go.
The Commerce Department also released performance data on the retail sector. The report showed that retail sales declined by 0.3% in January. This was an unexpected drop. Many analysts, however, say that despite these latest numbers, it’s still not easy to draw a clear picture of the US economy and the future prospects.
The rise in inflation is not really a surprise. Economists have always said that they expected inflation to rise due to the strong economic growth in the country and reduced unemployment rate. These expectations were somewhat emphasized last year after it was confirmed that inflation for the last 12 months was slightly above the 2% target set by the Federal Reserve.
The Federal Reserve uses higher interest rates as a measure to curb inflation. The data released suggests that inflation could continue to rise in the coming months. The Federal Reserve has already made it clear that it expects to raise interest rates at least three times this year. The January data provides a clear basis for this.
However, there are still some concerns. Investors fear that the Federal Reserve could move aggressively on rising rates in 2018. This would increase the cost of borrowing, making it harder for companies to access capital. This could stop the strong economic growth that we have seen so far. In addition to this, it’s very likely that the new tax cuts, as well as the increased government spending, could have a big impact on the inflation rate moving forward. The Federal Reserve has not yet taken any action in this regard but it’s just a matter of time before it does.