Economists are expecting the consumer price index (CPI) to rise 0.5% in January, with the annual rate slipping to 6.2% from 6.5%. Core CPI, which excludes food and energy, is anticipated to rise 0.3%, which would lower the core CPI inflation rate to 5.5%. The core consumer price index is forecast to rise 0.4% in January, slightly above December’s 0.3% increase. It is predicted that core CPI will increase by 5.5% in January, the smallest it has been in the past 13 months and a decrease from the 5.7% seen in the preceding month.
The yield on the 10-year Treasury bond increased by 5 basis points to reach 3.81%, a record high for Short-term interest rates, which have a closer connection to the Federal Reserve, did not fluctuate significantly. Investors predict that the Federal Reserve will likely raise interest rates by a quarter of a point at their March and May meetings. The markets are increasingly leaning toward a third hike taking place either in June or July, although the chances of this happening decreased slightly on Wednesday.
On Tuesday, Treasury yields increased, with the two-year note rate increasing as much as 12 basis points, which brought it to a nearly 4.64% high– the highest rate since November and less than 20 basis points away from the multiyear high from last year. Yields for three- and five-year terms both reached their highest points in As the day went on, rates stayed at high levels, and they may go up even more during the Asian trading session.
Since the beginning of February, Treasury yields have increased significantly, acting as a slight impediment to the stock market rebound, though not as powerful as it was in 2020. Yields are increasing now due to diminishing worries about a recession, whereas in 2022 they increased mainly because of inflation and concerns about the Federal Reserve. Wall Street is hoping for the Fed rate hikes to be finished, however, it doesn't want to see the economy falter.
The Federal Reserve has increased rates eight times in succession over the course of less than a year, with the latest rise being quarter of a percentage point, which is a slower rate of increase than almost all of 2022. Fed officials are expecting to implement a few more interest rate increases of a similar magnitude, and then they will pause to allow the higher rates to take effect. The federal funds rate, which is the Federal Reserve's base policy rate, is presently set between 4.5 and 4.75 percent – a level that is high enough to bring the economy to a slower pace.
0. “Dow Jones Futures: Market Rally Keeps Rising” Investor's Business Daily, 16 Feb. 2023, https://www.investors.com/market-trend/stock-market-today/dow-jones-futures-market-rally-keeps-climbing-shopify-roku-cisco-are-key-earnings-movers
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. “Treasury yields fall as investors await key wholesale inflation data” CNBC, 16 Feb. 2023, https://www.cnbc.com/2023/02/16/us-treasury-yields-investors-await-key-wholesale-inflation-data.html
3. “CPI: Prices rise 6.4 percent in January, seventh month of easing inflation” The Washington Post, 14 Feb. 2023, https://www.washingtonpost.com/business/2023/02/14/inflation-easing-cpi-january/