Inflation in the United States increased unexpectedly to 3 % in January, prompting speculation that the federal reserve may keep interest rates higher for a longer period.
Action Statistics Office data showed an increase in inflation from 2.9 % in the previous month, defying analysts’ expectations that it will remain unchanged. On a monthly basis, prices rose 0.5 %, up from 0.4 % in December. The basic inflation, which monitors the Federal Reserve closely, jumped to 0.4 % in January of 0.2 % in December, with the annual basic inflation to 3.3 % of 3.2 %.
The numbers indicated new doubts about whether the Federal Reserve will reduce interest rates in 2024. Federal Reserve Chairman Jerome Powell told the Senate Banking Committee that it “does not need to rush” in reducing borrowing costs, which enhances the increasing suspicion of economists.
The central bank left the main interest rate when suspended by 4.25 % to 4.5 % in January, after lowering it by a percentage last year. President Donald Trump has repeatedly called for price cuts, arguing that the low borrowing costs will complete the last wave of definitions on imports. However, Powell has resisted political pressure, as analysts indicate that the inflationary risks, which were exacerbated by Trump’s commercial policies, could keep rates high.
The reaction of the financial markets with fluctuation was. The S&P 500 index decreased by 0.3 % to 6,051.97, while the Dow Jones industrial average decreased by 0.5 % to 44368.56. Nasdak, which decreased by about 1 %, recovered to closely closed at 19649.95. The US dollar is strengthening the news, with the dollar index increasing by 0.32 %, while the pound decreased by 0.34 % against Greenback to $ 1.240.
Bond markets have also seen a reaction, with the return on the US note restricted in the United States climbing 11 basis points to 4.651 %. The United Kingdom followed Gilts, with the increase in government bonds for 10 years by 6 -year -old to 4.567 %.
Economists believe that the Federal Reserve can now carry fixed interest rates for the rest of the year. “The customs tariff will maintain the basic inflation by 3 % in 2024, the Federal Reserve will stand for at least 12 months,” said Paul Ashworth, a chief economist in North America in Capital Economics. The director of the fund, Janus Henderson, chanted this feeling, saying: “The bottom line is clear: The Federal Reserve should not be.”
Since his return to his post, Trump presented a 10 % tariff on Chinese imports, and then announced it, but then, he postponed a 25 % tax on Canadian and Mexican goods, and confirmed that a 25 % tariff on imported steel and aluminum would enter in March. Economists warn that these protectionist policies can keep inflation high, restrict economic growth, and delay in interest rates – despite the Trump campaign to reduce the cost of living.
Meanwhile, inflation in the UK is expected to reach 3.7 % this summer, up from the current 2.5 %, according to England. The euro area enlargement rate increased to 2.5 %. However, it is still expected that both the Bank of England and the European Central Bank will continue to cut off this year.
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