US inflation data for January turned out to be higher than expected. The consumer price index rose 7.5% yoy, the highest since the early 1980s. Core inflation (which excludes the more volatile components of food and energy) also rose more than expected. Indications that make the markets fear a more aggressive policy by the Federal Reserve.
Indeed, the Fed has made it clear that high inflation represents the greatest risk to growth and this figure shows that the central bank will be forced to intervene and manage inflation before risking losing control of the economy.
How to understand in which direction it will go? “The hypothesis of a rate hike of 50 basis points by the end of March still holds true – replies Callie Cox, US Investment Analyst at eToro – If the Fed were to consider a greater increase by that date, its members will probably continue to prepare the markets for this option through public comments. It will therefore be important to pay close attention to the Fed’s words in the coming weeks. The minutes of the January meeting could also provide some clues about the future strategy of the central bank. “