Hopes that the US Federal Reserve could begin a series of base rate cuts from May have been heavily dampened on news inflation outdid expectations in January, analysts say.
US inflation came in 3.1% for January, higher than analysts’ expectations of 2.9% and hitting hopes of imminent rate cuts as a result.
“Odds have reduced further [of a May rate cut] following publication of today’s data,” Titan Asset Management chief investor John Leiper said.
“A plethora of recent economic data, including leading indicators for wages, highlight ongoing inflationary pressures,” he added, “we saw signs of that in today’s numbers”.
Omnis Investments chief strategist Richard Garland explained that the path was also going to be “bumpy” meanwhile, but said moderating wage growth should start to show in future month’s figures.
“The Fed is keen not to make a mistake and wants confirmation of this before committing to a reduction in interest rates,” he commented.
“However, this eagerness may itself prove to be a mistake, if interest rates are held too high for too long.”
The consumer price index figure was lower than December’s reading of 3.4% meanwhile, with core inflation climbing by 3.9% in January, ahead of and anticipated of 3.7%.
US stock market futures faced a blow on the news, with the Nasdaq being called down 1.6%, alongside the S&P 500 and Dow Jones by 1.2% and 0.9%.