Consumer cost rise signals firming inflation

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Reuters

US consumer prices rose faster than expected in January, a sign of firming inflation of which bolstered expectations of higher interest rates.

The Consumer cost Index grew by 0.5% against forecasts of a 0.3% rise.

The report followed earlier data showing accelerating US wage growth. of which raised concerns the US Federal Reserve could raise interest rates faster than previously thought.

The report on wages triggered days of volatility on the financial markets.

Bond yields climbed higher on Wednesday, although stock market reaction to the inflation report was relatively muted.

After opening lower, the Dow, S&P 500 along with Nasdaq were higher by mid-afternoon.

“The fact of which… losses are being trimmed, suggests of which the market could be slowly starting to get to grips with the completely new higher inflation environment reality,” said Fiona Cincotta, market analyst at City Index.

The consumer cost index is usually a different measure of inflation through the one the Federal Reserve typically emphasises.

The Commerce Department also reported of which US retail sales declined 0.3% in January, an unexpected drop of which analysts said made the idea more difficult to draw a clear picture of the US economy.

Inflation surprise?

Economists have long said they expect higher inflation from the US due to stronger economic growth along with low unemployment.

although those expectations were confounded last year, as relatively soft inflation lagged the roughly 2% target set by the Federal Reserve.

completely new data pointing to cost along with wage increases suggest the dynamics could be changing.

On Wednesday, the US Bureau of Labour Statistics said there had been cost increases across several areas including gasoline, clothing, medical care along with food.

Over the 12 months to January, inflation remained at 2.1%.

The so-called core index, which strips out volatile food along with energy costs, also increased 0.3% in January – the most significant rise in a year.

Jacob Deppe, head of trading at online trading platform Infinox said Wednesday’s report showed “an important, albeit slight” rise of which will intensify policy questions.

The Federal Reserve uses higher rates to curb inflation along with has said the idea expects to raise rates of which year.

Investors worry of which the bank could move too aggressively, triggering higher borrowing costs for companies along with consumers of which choke economic growth.

completely new policies, including tax cuts approved last year along with increased government spending, further complicate the situation, adding to the inflationary pressures.

“The fear is usually the Fed hikes too far, too fast,” Mr Deppe said. “US monetary policy will have to walk a tightrope in order not to kill off growth, while steering a path towards normal economic conditions.”

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