The Inflation Tour: Post-CPI Results

Following on from our note on Tuesday’s inflation figures, all eyes are on these:

The general consumer price index rose 0.5% in January, the most in three months. This is according to data released by the Bureau of Labour Statistics on Tuesday. Compared to the same month last year, the index rose by 6.4%.

Combined with January’s excellent labour market report and signs of continued consumer resilience, these figures underscore the resilience of the economy – and price pressures – despite the Fed’s aggressive policy. The data back up recent claims by central bankers that they will need to continue to raise interest rates and keep them at higher levels for some time, possibly even at a higher peak than previously expected.

The road to stable prices is likely to be both long and bumpy. The disinflation in goods that has driven the decline in headline inflation in recent months appears to be losing steam, and the strength of the labour market continues to pose upside risks to wage growth and service prices.

With data from CPI, the market was flat overall yesterday. That is, it was neither good nor bad – it is a development. In other words, inflation trends look good, but how long this battle will last remains uncertain.

It looks like low-frequency trading is still the way to go for now.

TFC Team

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