Inflation in the United States unexpectedly rose to 3%in January, so that speculation was fueled that the Federal Reserve can keep the interest rates longer.
Data from the Bureau of Labor Statistics showed that inflation is increasing from 2.9% the last month and the expectations of analysts that it would remain unchanged. Prices rose by 0.5% on a monthly basis, an increase of 0.4% in December. The core inflation, which closes the FED closely, also rose to 0.4% in January from 0.2% in December, with an annual core inflation to 3.3% of 3.2%.
The figures arouse new doubts about whether the FED will lower the interest rates in 2024. FED -President Jerome Powell told the Senate Bank Committee that “it was not necessary to hurry” to reduce the loan costs, reducing the growing skepticism among economists the growing skepticism.
The Central Bank had its most important interest rate on hold in 4.25% to 4.5% in January, after he reduced it by one percentage point last year. President Donald Trump has repeatedly called for tariff reductions, with the argument that lower loan costs would supplement his last rates when entering. Powell, however, has opposed political pressure, in which analysts suggest that inflationary risks, exacerbated by Trump’s trade policy, can increase the rates.
Financial markets responded with volatility. The S&P 500 fell 0.3% to 6,051.97, while the industrial average of Dow Jones was 0.5% dropped to 44,368.56. The Nasdaq, which had fallen nearly 1%, recovered to close marginal higher at 19,649.95. The US dollar strengthened the news, with the dollar index by 0.32%, while the pound fell 0.34% compared to the Greenback to $ 1.240.
Bond markets also saw a response, with the proceeds on the benchmark 10-year-old US Treasury Note that climb 11 basic points to 4.651%. British Gilts followed the example, with the return on 10-year-old government bonds that increase with 6 basic points to 4,567%.
Economists believe that the Fed could now keep the interest rates stable for the rest of the year. Paul Ashworth, Chief North -America Economist at Capital Economics, said: “With rates that will probably hold core inflation at or above 3% in 2024, the FED will be pat at least in the next 12 months.” Fund manager Janus Henderson repeated this sentiment and stated: “The Bottom Line is clear: the FED may not cut.”
Since the return to the office, Trump has introduced, announced a rate of 10% on Chinese import, but then postponed a 25% tax on Canadian and Mexican goods and confirmed that a rate of 25% on imported steel and aluminum will be in March. Economists warn that this protectionist policy could keep inflation high, limit economic growth and delay interest rates – despite Trump’s promise to reduce the costs of living.
In the meantime, inflation in the UK is expected to worry at 3.7% this summer, an increase in the current 2.5%, according to the Bank of England. The inflation percentage of the eurozone has also risen to 2.5%. Both the Bank of England and the European Central Bank, however, are still expected to pursue gradual tariff reductions this year.