U.S. Inflation Surges with New CPI Reports, Prompting Caution from Federal Reserve
U.S. inflation unexpectedly increased in January, raising concerns about the economic impact of the Trump administration's policies amidst ongoing inflationary pressures.
The latest wholesale figures further dimmed investors’ hopes for interest rate cuts in the near term, and even stoked fears that central bankers may be tempted to raise rates.
Wholesale prices higher than expected last month — fresh on heels of hot inflation report
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Inflation measured by the PPI peaked at 11.6 percent in March 2022, a few months before the peak of CPI in June of 2022 at 9.0 percent.
Bidenflation's Legacy: Producer-Price Inflation Stayed Hot As Year Began
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All signs point to the Fed holding interest rates higher for longer, which means consumers will continue to be impacted by stubbornly elevated interest rates impacting a range of credit products, including credit cards, mortgages, unsecured personal loans and auto loans, according to Charlie Wise, TransUnion's senior vice president of research and consulting.
January inflation gives Fed more reason to hold on interest rate cuts
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The layers of intellectual confusion here are hard to parse, especially since higher tariffs will mean higher prices on the affected goods.
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Despite the higher-than-expected wholesale price increase, Paul Ashworth of Capital Economics wrote in a commentary, “the components that feed into the Fed’s preferred PCE price measure were, on the whole, very tame,” including modest changes in some health care prices.
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Together, the reports are pushing back expectations for a rate cut until the second half of the year, though inflation data can be volatile and the outlook could change depending on what subsequent months show.
Producer prices report points to softer Fed inflation measure than feared
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Inflation flared up in early 2021 as the economy rebounded with unexpected strength from COVID-19 lockdowns, overwhelming factories, ports and freight yards and leading to shortages, delays and higher prices.
U.S. wholesale prices up a hotter-than-expected 0.4% in December
ABC News·1M·ReliableThis source consistently reports facts with minimal bias, demonstrating high-quality journalism and accuracy.CenterThis outlet is balanced or reflects centrist views.Despite the higher-than-expected wholesale price increase, Paul Ashworth of Capital Economics wrote in a commentary, “the components that feed into the Fed’s preferred PCE price measure were, on the whole, very tame,’' including modest changes in some health care prices.
December wholesale prices up a hot 0.4% as fight against inflation appears to have stalled
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The policies the Trump White House has enacted are likely to make the cost crisis worse.
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Americans are feeling the pressure after inflation hit a seven-month high last month.
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Summary
The Labor Department's report shows U.S. wholesale prices rose 0.4% in December, while January's CPI data reveals an unexpected 3.3% year-on-year increase. Core inflation rose 0.4%, with significant shelter cost increases driving inflationary trends. Analysts warn that persistent inflation could complicate President Trump's proposed trade policies, including tariffs, and limit Federal Reserve interest rate cuts. Economists caution about the inflationary impact of Trump's policies. The Federal Reserve remains hesitant to cut rates, citing strong labor markets and ongoing inflation, while the economic landscape remains uncertain as the new administration's policies begin to take shape.
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