Inflation rises more than expected after scare that rocked global markets

pulse

February 14, 2018 2:48 PM

The report could relieve or worsen concerns about inflation and higher interest rates.

Inflation in January rose more than economists had forecast, a report from the Bureau of Labor Statistics showed on Wednesday.
Wall Street had keenly awaited this report following an inflation scare that helped drive the stock market's first correction in two years.
The price increases were broad-based, driven mainly by clothing.

Inflation rose more than expected in January, according to a keenly awaited report released on Wednesday.

The Bureau of Labor Statistics' consumer price index, which tracks price changes of a basket of consumer goods, rose 2.1% year-on-year in January. Economists polled by Bloomberg had forecast a 1.9% jump.

The report was closely watched because it could intensify concerns about inflation and higher interest rates that helped drive the stock market into its first correction in two years. On Feb. 2, the January jobs report showed the fastest year-over-year growth in average hourly earnings since 2008.

Nearly all the major items tracked by the BLS rose in price, notably clothes, gasoline, housing, and food.

Core CPI, which strips out volatile food and energy costs, rose 1.8% from a year ago, which was more than the forecast for 1.7%.

Compared to the prior month, CPI increased 0.5% in January (0.3% expected).

In the long run, "inflation is probably heading higher," Lewis Alexander, Nomura's chief economist, said in a preview.

"Peering through the specifics and looking at the bigger picture, the key issue in our view at present is that fiscal policy is becoming more expansionary at a time when many economies are already at (or close to) full employment."

That scenario strengthens the case for the Fed and other central banks to continue raising rates, which is what helped intensify the recent discomfort among investors.

Treasurys fell after the CPI report, with the yield on the 10-year note rising to its highest level since January 2014, on more proof that US inflation is accelerating. US stocks reversed earlier gains, with Dow Jones industrial average futures plunging nearly 1%.

pulse

Enhance Your Pulse News Experience!

Get rewards worth up to $20 when selected to participate in our exclusive focus group. Your input will help us to make informed decisions that align with your needs and preferences.

I've got feedback!

JOIN OUR PULSE COMMUNITY!

Unblock notifications in browser settings.

Eyewitness? Submit your stories now via social or:

Email: eyewitness@pulse.ng