U.S. inflation rises more than expected, raising uncertainty about Fed’s interest rate cut
Xinhua News Agency, New York, February 13
Summary｜Inflation rises more than expected, and the outlook for the Fed to cut interest rates is uncertain
Xinhua News Agency reporter Liu Yanan
The U.S. consumer price index (CPI) rose more than expected in January, increasing uncertainty about the direction of the Federal Reserve’s monetary policy. Economists predict that the Federal Reserve may cut interest rates later, and the intensity of the rate cuts may also be reduced.
Data released by the U.S. Department of Labor on the 13th showed that the U.S. CPI rose 0.3% month-on-month in January, the largest increase since September last year. It rose 3.1% year-on-year, surpassing the 2% long-term inflation target set by the Federal Reserve and also higher than the market consensus of 2.9%. After excluding volatile food and energy prices, the core CPI rose 0.4% month-on-month and had a year-on-year increase of 3.9%, also higher than market expectations of 3.7%.
Following the release of the CPI data, market expectations for the Federal Reserve’s monetary policy became more uncertain. The probability of the Federal Reserve maintaining interest rates at the March monetary policy meeting rose to more than 90%, while the probability of a 25 basis points rate cut at the May meeting dropped to less than 35%.
Bank of America Global Research said the CPI data further strengthened concerns about inflationary pressures caused by tight labor markets. The possibility of the Federal Reserve cutting interest rates in March and May has declined, and it is expected to start cutting interest rates in June.
Market analyst James Helchik said the direction of the Fed’s monetary policy has now become more uncertain, which has led to a dampening of sentiment in the stock market. The three major stock indexes in the New York stock market opened significantly lower on the 13th, continued to weaken during the session, and significantly fell at the close.
As of the close of the day, the Dow Jones Industrial Average fell 524.63 points from the previous trading day to close at 38272.75 points, a decrease of 1.35%; the S&P 500 Stock Index fell 68.67 points to close at 4953.17 points, a decrease of 1.37%; Nasdaq The Gram Composite Index fell 286.95 points to close at 15655.60 points, a decrease of 1.80%.
Thomas Martin, a senior portfolio manager at Globolt Investment Company in the United States, said that the stock market decline after the release of inflation data was an “instinctive reaction” among investors. Although the latest inflation data is somewhat worrying, it will not change the trend of cooling inflation’s overall direction.