CPI data: US inflation beats expectations in January

• US inflation beats expectations in January
• Impact of Trump's protectionist policies on the CPI
• Fed interest rate hike forecasts

Recent data released by the United States Bureau of Labor Statistics revealed an increase in consumer prices in January, exceeding previous predictions . This increase was driven by the reversal in core price easing, putting the Federal Reserve's future interest rate actions into focus.

The Consumer Price Index (CPI) rose 3,0% year-on-year, up from 2,9% in December. Factors such as rising fuel costs and stable food inflation were key to keeping headline indices high.

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Compared to the previous month, the CPI rose 0,5 percent, a modest acceleration from December’s 0,4 percent increase and above economists’ forecasts of just a 0,3 percent increase. Excluding volatile food and gas costs, prices rose 0,4 percent in January from December and 3,3 percent from a year earlier, reflecting growth above the 3,2 percent seen in December.

Despite the slowing trend in inflation, it remained above the Federal Reserve's 2% target on an annual basis. The economic outlook was further complicated by the rise of protectionist policies under the Trump administration, raising concerns about a possible resurgence in inflation.

CPI went up: Why does this matter?

This indicates that prices are rising, which is a sign of inflation. A rise in the CPI can be considered bad if it is too rapid and sustained, because it reduces people’s purchasing power — that is, people can buy less things with the same amount of money. This can lead to a spiral of rising wages and prices, known as runaway inflation.