The data from the U.S. Bureau of Labor Statistics shows that most indicators were slightly higher than analysts’ expectations.
January 2024 Consumer Price Index (CPI) data released by the U.S. Government indicated that inflation was still trending downward . However, CPI was moving downward more slowly than expected.
The U.S. Bureau of Labor Statistics CPI data show that overall CPI rose 0.3 percent in January on a seasonally adjusted basis. Over the last 12 months, the all-items index rose 3.1 percent before seasonal adjustment. While 0.1 percent higher month-on-month, it does show a drop from December’s 3.4 percent year-on-year rise.
Declining energy prices helped keep a check on inflation. The all items less food and energy index rose 3.9 percent year-on-year. This matched the 12-month increase in December. However, the energy index fell 4.6 percent year-on-year in January, mostly due to a drop in the price of gasoline. Other indices that lowered included those for used cars and trucks and for apparel.
Reuters notes that housing and real estate prices, including rents, grew more than expected and that this kept the index high. This includes rents.
Managing expectations
Estimates hovered around 2.9 percent before the release, and the slightly higher than expected rise created room for concern. Market players are waiting for a sign that the Fed will cut lending rates, and higher than expected inflation does nothing to convince the Fed that the sooner the rates are cut, the better. Instead, they will have to wait until mid-year or later for the data to convince the Fed that the time has come for a drop.
The major indices reacted sharply to the inflation news. All three major U.S. indices dropped approximately 1 percent on the news and continued to decline almost another 1 percent by closing. The S&P 500 fell off its recently gained 5,000 mark and closed at 4939.18. The NSADAQ fell from recent highs. to 15655.60. The DJIA ended the day down 1.35% at 38272.75.
The Fed attempted to manage expectations before the data were released. Federal Reserve Bank of Atlanta president Raphael Bostic told CNN in an interview on the day before the release that he did not see a rate cut coming before mid-year. Bostic called the course of inflation in 2024 a “bumpy” ride downward. He saw CPI in the “low two’s” before the end of 2024, however.
