Inflation shot higher than expected in January.

The latest Consumer Price Index (CPI) report has thrown a wrench into the expected timeline for Federal Reserve rate cuts, as inflation figures for January came in higher than anticipated. 

The report revealed a smaller drop in January’s CPI from December’s figures, coupled with a higher-than-forecast core CPI, which excludes food and fuel prices. 

This development underscores the challenges facing Federal Reserve officials in their efforts to bring inflation down, and is just one more indicator that wasteful spending and record national debt continue to rock America’s economy and dollar. 

In January, inflation surged by 3.1% on an annualized basis, exceeding Wall Street’s predictions and pushing back expectations for Federal Reserve interest rate cuts. Futures markets now indicate less than a 10% probability of a rate cut at the March meeting, a significant shift from the nearly 80% probability forecasted in January.

The unexpected spike in inflation triggered a widespread market selloff, with the Dow Jones Industrial Average experiencing its worst day since March 2023.

Breaking down the January CPI figures, the report revealed a 0.3% increase in the Consumer Price Index for All Urban Consumers (CPI-U) on a seasonally adjusted basis in January, with the all items index rising by 3.1% over the last 12 months, before seasonal adjustment. 

The rise in the CPI was largely driven by increases in shelter costs, which contributed to over two-thirds of the overall monthly increase, and food prices rose by 0.4% in January, both of which significantly cut into the budgets of American families. 

This report showing the surge in inflation also comes after an interview that Federal Reserve Chair, Jerome Powell gave to 60 Minutes, stating that issues such as the ever-rising federal debt concerns even him, and that the United States is on an “unsustainable fiscal path.”

It is well past time for Governments at all levels, from the federal down to the local, to get spending and debt under control, and start loving within their means, just like everyday Americans.

Looking ahead, the Federal Reserve is expected to closely monitor another inflation indicator known as the core personal-consumption expenditures index, with the next report set to be released on February 29th.

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