Inflation Surprises: Hotter than Expected, Rate Cuts on Hold?

January’s inflation data delivered a mixed bag: good news on the overall number, not so good on the details. Headline inflation fell to 3.1%, ticking closer to the Fed’s 2% target, but it missed forecasts and remained above December’s level. Core inflation, excluding volatile food and energy, held steady at 3.9%, higher than expected.

So, what does this mean for your wallet and the broader economy?

The headline number might offer a sigh of relief, but beneath the surface, price pressures persist. Housing costs, a major pain point for many Americans, continued to climb, contributing heavily to the overall increase. This, coupled with the higher-than-expected core inflation, suggests the fight against inflation isn’t over yet.

This hotter-than-expected data likely puts a hold on the Fed’s plans for immediate interest rate cuts. While the central bank wants to cool the economy and tame inflation, it also needs to avoid pushing it into recession. This balancing act might see them waiting until at least summer before easing rates.

For investors, this could mean continued market volatility as they adjust to the Fed’s cautious stance. While robust job growth and record highs in stock markets offer some optimism, inflation’s stickiness casts a shadow.

Overall, the January inflation report provides a mixed bag. While progress is being made, there’s still work to do before the Fed feels comfortable easing off the inflation brakes.

Sources: U.S. Bureau of Labor Statistics, Financial Times, The Wall Street Journal.

Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst

Disclaimer: Trive South Africa (Pty) Ltd (hereinafter referred to as “Trive SA”), with registration number 2005/011130/07, is an authorised Financial Services Provider in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Trive SA is authorised and regulated by the South African Financial Sector Conduct Authority (FSCA) and holds FSP number 27231. Trive Financial Services Ltd (hereinafter referred to as “Trive MU”) holds an Investment Dealer (Full-Service Dealer, excluding Underwriting) Licence with licence number GB21026295 pursuant to section 29 of the Securities Act 2005, Rule 4 of the Securities Rules 2007, and the Financial Services Rules 2008. Trive MU is authorized and regulated by the Mauritius Financial Services Commission (FSC) and holds Global Business Licence number GB21026295 under Section 72(6) of the Financial Services Act. Trive SA and Trive MU are collectively known and referred to as “Trive Africa”.

Market and economic conditions are subject to sudden change which may have a material impact on the outcome of financial instruments and may not be suitable for all investors. Trive Africa and its employees assume no liability for any loss or damage (direct, indirect, consequential, or inconsequential) that may be suffered. Please consider the risks involved before you trade or invest. All trades on the Trive Africa platform are subject to the legal terms and conditions to which you agree to be bound. Brand Logos are owned by the respective companies and not by Trive Africa. The use of a company’s brand logo does not represent an endorsement of Trive Africa by the company, nor an endorsement of the company by Trive Africa, nor does it necessarily imply any contractual relationship. Images are for illustrative purposes only and past performance is not necessarily an indication of future performance. No services are offered to stateless persons, persons under the age of 18 years, persons and/or residents of sanctioned countries or any other jurisdiction where the distribution of leveraged instruments is prohibited, and citizens of any state or country where it may be against the law of that country to trade with a South African and/or Mauritius based company and/or where the services are not made available by Trive Africa to hold an account with us. In any case, above all, it is your responsibility to avoid contravening any legislation in the country from where you are at the time.

CFDs and other margin products are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how these products work and whether you can afford to take the high risk of losing your money. Professional clients can lose more than they deposit. See our full Risk Disclosure and Terms of Business for further details. Some or all of the services and products are not offered to citizens or residents of certain jurisdictions where international sanctions or local regulatory requirements restrict or prohibit them.