Consumer Prices and Interest Rates on the Rise – What Investors Need to Know
By It is anticipated by economists that the total consumer price index will increase by 0.5% in January, following December's upward revision of 0.1%. It is expected that the yearly rate will decrease to 6.2% from[0] It is expected that the CPI, not including food and energy, will increase by 0.3%.[1] The core CPI inflation rate would be reduced to 5.5%.[0] The consumer price index climbed 0.5% in January, up 6.4% from a year earlier, and core CPI, which excludes food and energy, advanced 0.4% last month and was up 5.6% from a year earlier.
The Federal Reserve has responded to the inflation problem by aggressively raising interest rates in an effort to cool the economy and ease price pressures. Fed officials have been raising rates to try to cool inflation that hit a 40-year high last year, and while inflation is ticking down across a large swath of the economy, core services, excluding the housing sector, have still not seen any easing. This has been a driving factor behind additional rate hikes.[2]
Investors have been upping their bets on how far the Fed will raise rates this tightening cycle, with the market for wagers on the Fed’s policy rate boosting the chances of a quarter-point rate increase in June to about 50%.[3]
The yield on 10-year Treasuries advanced four basis points to 3.84%.[3] The Dow Jones Industrial Average fell 0.8%, more than any closing loss since Jan. 18.[3] Despite significant increases in the stock prices of Tesla, Aptiv, and CDNS, the S&P 500 index experienced a slight decrease.[4] The Nasdaq composite experienced an increase of 0[4] The small-cap Russell 2000 edged lower.[4]
The January Consumer Price Index (CPI) is set to be released Tuesday morning and will be heavily scrutinized, particularly after Federal Reserve Chair Jerome Powell acknowledged the presence of “disinflation” in the U.S. economy.[5] It is expected to show inflation has eased, which would reinforce Powell's belief that disinflation is underway.[5]
Roku saw its stocks rise by 9% after the streaming device firm reported a loss that was narrower than anticipated, while also surpassing the sales estimates of analysts in its latest quarter.[6] After Cisco Systems reported results that surpassed analysts' expectations, the stock of the digital communications firm rose by 4%.[6]
0. “Fade The CPI; Here's What Matters To The Fed, S&P 500” Investor's Business Daily, 13 Feb. 2023, https://www.investors.com/news/economy/fade-the-cpi-inflation-report-what-matters-to-the-fed-sp-500
1. “Traders Capitulate, Abandoning Fed Rate Cut Bets After CPI Spike” Yahoo News, 14 Feb. 2023, https://news.yahoo.com/traders-capitulate-abandoning-fed-rate-213611625.html
2. “Overall inflation eased in January but price pressures continue” Deseret News, 14 Feb. 2023, https://www.deseret.com/utah/2023/2/14/23599164/annual-inflation-down-a-bit-in-jan-but-price-pressures-continue-jobs-market-federal-reserve-gas
3. “Stocks Drop on Tough Fedspeak, High Producer Costs: Markets Wrap” Yahoo! Voices, 16 Feb. 2023, https://www.yahoo.com/now/asia-stocks-rise-wall-street-223547251.html
4. “Futures Fall After Market Shrugs Off Inflation; Hot Stock Crashes” Investor's Business Daily, 15 Feb. 2023, https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-market-rally-shrugs-off-hot-inflation-tesla-runs-airbnb-flies-on-earnings
5. “Consumer prices rose 6.4% in January” Fox Business, 14 Feb. 2023, https://www.foxbusiness.com/economy/will-cpi-reinforce-powells-disinflation-view
6. “Dow falls more than 100 points after another hot inflation report: Live updates” CNBC, 16 Feb. 2023, https://www.cnbc.com/2023/02/15/stock-market-today-live-updates.html
