On Tuesday, the latest reading of the consumer price index (CPI), which tracks price changes for a range of goods and services, came in higher than expected and showed that inflation rose by 0.5% in January. The Consumer Price Index (CPI) has risen by 6. Taking a closer look at the January CPI numbers, the headline inflation rose 6.4% year-over-year, down from December's 6.5%, marking the seventh straight monthly decline for the consumer price index after it peaked at 9.1% in June. Core CPI, which excludes volatile food and energy prices, was up 0.4% on a monthly basis, faster than the 0.3% monthly increase seen in December. This signaled that the disinflationary process is slowing, although the process of inflation-abating is still in play in the U.S.
The news on inflation is likely to keep the Federal Reserve on a path of higher interest rates, as officials echoed the need for further interest-rate increases to help tame inflation. Treasury yields rose Tuesday, with the rate on the two-year note climbing as much as 12 basis points to nearly 4.64%, the highest since November and within 20 basis points of last year’s multiyear high. The Federal Open Market Committee's upcoming meeting in March is almost sure to result in a 0.25% rate increase, and economists anticipate that another rise is probable in May.
Meanwhile, stocks were falling after retail sales fuel rate fears. The Dow Jones Industrial Average (DJIA) fell 0.5%, more than any closing loss since Feb. 9. At 11:03 Eastern Time (16:03 Greenwich Mean Time), the Dow Jones Industrial Average had decreased by 158 points, or 0.5%, while the S&P 500 and the NASDAQ Composite dropped by 0.5% and 0.3%, respectively. The futures associated with the Dow Jones Industrial Average decreased by 25 points, representing a 0.07% decline. Meanwhile, S&P 500 futures dropped marginally, and Nasdaq-100 futures declined 0.12%. The yield on 10-year Treasury bonds increased by 4 basis points to 3.76%. The 6-month Treasury bill rate has risen to 5.02%, surpassing the 5% mark for the first time in over a decade. The yield on the one-year Treasury bond has risen to 4.
0. “Consumer prices rose 6.4% in January” Fox Business, 14 Feb. 2023, https://www.foxbusiness.com/economy/will-cpi-reinforce-powells-disinflation-view
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3. “Annual Services Inflation Rages at New Four-Decade High, Monthly Overall CPI Hottest since June” WOLF STREET, 14 Feb. 2023, https://wolfstreet.com/2023/02/14/annual-services-inflation-rages-at-new-four-decade-high-overall-monthly-cpi-hottest-since-june
4. “US inflation stays high as housing costs bite” BBC, 14 Feb. 2023, https://www.bbc.com/news/business-64639662
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8. “Bill Smead: U.S. inflation is ‘far stickier' and could last a decade” CNBC, 14 Feb. 2023, https://www.cnbc.com/2023/02/14/bill-smead-us-inflation-is-far-stickier-and-could-last-a-decade.html
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