“The CPI marked a maximum of +9.1% in June and it is essential that it confirm the downward path that it has followed uninterruptedly since then. Levels close to 5% in the underlying would be consistent with interest rates at 5.00/5.25%, which is the most probable terminal range and which would provide relief to a market that already discounts these levels”, they explain at Bankinter.
Economists polled by Reuters had forecast the CPI to rise 0.5%. Much of the survey was conducted before the Labor Department’s Bureau of Labor Statistics (BLS) released annual revisions to the seasonally adjusted CPI data on Friday. The BLS also updated seasonal adjustment factors, the model it uses to remove seasonal fluctuations from the data.
The expenditure weights used to calculate the CPI were also updated from the January report. The new weights, which were published on Friday, reflect consumer spending in 2021.
Now the share of housing in the CPI has been raised, but the weights of transport and food have been reduced. The revisions, updated seasonal factors, and new weights led some economists to raise their CPI forecasts.
Nevertheless, inflation is slowing, allowing the Fed to continue its small pace of rate hikes next month.
In the 12 months to January, the CPI rose 6.4%. That was the smallest gain since October 2021 and followed a 6.5% rise in December. The annual CPI peaked at 9.1% in June, which was the largest increase since November 1981.
The moderation in price pressures reflects tighter monetary policy, which weighs on demand, as well as better supply chains. However, it will be a while before inflation returns to the Fed’s 2% target as sticky rents and a tight labor market keep utility prices high.
The US central bank has raised its policy rate by 450 basis points since last March, from near zero to a range of 4.50% to 4.75%, with most of the increases between May and December. Economists believe the Fed could raise this rate above the 5.1% high it projected in December and keep it there for some time.
Excluding the volatile food and energy components, the CPI rose 0.4% after rising 0.4% in December. In the 12 months to January, the so-called core CPI gained 5.6% after rising 5.7% in December.
Source: Ambito
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