Tag: CPI

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UK inflation holds steady – but food prices continue to bite!

UK inflation

The latest figures from the Office for National Statistics (ONS) reveal that UK inflation remained unchanged at 3.8% in August 2025, matching July’s rate and defying expectations of a slight dip.

While this steadiness may offer a glimmer of stability, the underlying story is more complex—and more costly—for British households.

📈 Headline vs. Reality

  • The Consumer Prices Index (CPI) staying at 3.8% means inflation is still nearly double the Bank of England’s 2% target.
  • Core inflation, which strips out volatile items like energy and food, eased slightly to 3.6%, down from 3.8% in July.
  • However, food and drink inflation surged to 5.1%, marking the fifth consecutive monthly rise and the highest level since January 2023.

🥦 What’s Driving the Cost Surge?

The price hikes are most pronounced in everyday essentials

  • Vegetables, milk, eggs, cheese, and fish saw notable increases.
  • Rising employment costs, poor harvests, and new packaging taxes have added pressure on retailers, who are passing these costs onto consumers.

🏦 Monetary Policy in the Balance

The Bank of England, which recently cut interest rates from 4.25% to 4%, is treading carefully. With inflation expected to peak at 4% in September before easing in early 2026, policymakers are hesitant to introduce further rate cuts this year.

Economists suggest that unless inflation shows clearer signs of retreat, the central bank may hold off on additional monetary easing until February 2026.

💬 Political and Retail Response

Chancellor Rachel Reeves reportedly acknowledged the strain on families, pledging to ‘bring costs down and support people who are facing higher bills’.

Meanwhile, industry leaders are calling for relief in the upcoming Autumn Budget, urging the government to cut business rates and ease regulatory burdens.

Retailers like Tesco and Sainsbury’s are seeing mixed fortunes. Tesco gained market share and posted its strongest growth since December 2023, while Asda lagged behind with declining sales.

🧾 What It Means for You

For mortgage holders, renters, and shoppers, the unchanged headline rate offers little comfort. With food inflation outpacing wage growth, many households are feeling the pinch.

The Autumn Budget may bring targeted support, but for now, the weekly shop continues to swallow a larger chunk of UK income.

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Global stocks indices flying high as new records broken – 12th August 2025

New records for global indices led by U.S. tech

In a sweeping rally that spanned continents and sectors, major global indices surged to fresh record highs yesterday, buoyed by cooling inflation data, renewed hopes of U.S. central bank rate cuts, and easing trade tensions.

U.S. inflation figures released 12th August 2025 for July came in at: 2.7% – helping to lift markets to new record highs!

U.S. Consumer Price Index — July 2025

MetricValue
Monthly CPI (seasonally adjusted)+0.2%
Annual CPI (headline)+2.7%
Core CPI (excl. food & energy)+0.3% monthly, +3.1% annual

Despite concerns over Trump’s sweeping tariffs, the U.S. July 2025 CPI came in slightly below expectations (forecast was 2.8% annual).

Economists noted that while tariffs are beginning to show up in certain categories, their broader inflationary impact remains modest — for now.

Global Indices Surged to Record Highs Amid Rate Cut Optimism and Tariff Relief

Tuesday, 12 August 2025 — Taking Stock

📈 S&P 500: Breaks Above 6,400 for First Time

  • Closing Level: 6,427.02
  • Gain: +1.1%
  • Catalyst: Softer-than-expected U.S. CPI data (+2.7% YoY) boosted bets on a September rate cut, with 94% of traders now expecting easing.
  • Sector Drivers: Large-cap tech stocks led the charge, with Microsoft, Meta, and Nvidia all contributing to the rally.

💻 Nasdaq Composite & Nasdaq 100: Tech Titans Lead the Way

  • Nasdaq Composite: Closed at a record 21,457.48 (+1.55%)
  • Nasdaq 100: Hit a new intraday high of 23,849.50, closing at 23,839.20 (+1.33%)
  • Highlights:
    • Apple surged 4.2% after announcing a $600 billion U.S. investment plan.
    • AI optimism continues to fuel gains across the Magnificent Seven stocks.

Nasdaq 100 chart 12th August 2025

Nasdaq 100 chart 12th August 2025

🧠 Tech 100 (US Tech Index): Momentum Builds

  • Latest High: 23,849.50
  • Weekly Gain: Nearly +3.7%
  • Outlook: Traders eye a breakout above 24,000, with institutional buying accelerating. Analysts note a 112% surge in net long positions since late June.

🇯🇵 Nikkei 225: Japan Joins the Record Club

  • Closing Level: 42,718.17 (+2.2%)
  • Intraday High: 43,309.62
  • Drivers:
    • Relief over U.S. tariff revisions and a 90-day pause on Chinese levies.
    • Strong earnings from chipmakers like Kioxia and Micron.
    • Speculation of expanded fiscal stimulus following Japan’s recent election results.

🧮 Market Sentiment Snapshot

IndexRecord Level Reached% Gain YesterdayKey Driver
S&P 5006,427.02+1.1%CPI data, rate cut bets
Nasdaq Comp.21,457.48+1.55%AI optimism, Apple surge
Nasdaq 10023,849.50+1.33%Tech earnings, institutional buying
Tech 10023,849.50+1.06%Momentum, bullish sentiment
Nikkei 22543,309.62+2.2%Tariff relief, chip rally

📊 Editorial Note: While the rally reflects strong investor confidence, analysts caution that several indices are approaching technical overbought levels.

The Nikkei’s RSI, for instance, has breached 75, often a precursor to short-term pullbacks.

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UK inflation unexpectedly climbs to 3.6% in June 2025

UK inflation up!

The latest UK inflation figure of 3.6% is a setback for those hoping for a steady decline, especially after May’s 3.4%.

With core inflation and food prices also climbing, it’s a sign that underlying price pressures remain stubborn.

It further complicates the Bank of England’s path towards interest rate cuts and dents optimism for faster economic relief.

Summary

📈 Headline CPI: Increased to 3.6%, up from 3.4% in May 2024

🔍 Core inflation (excluding food, energy, alcohol, and tobacco): Rose to 3.7%, from 3.5%

🛒 Food inflation: Climbed to 4.5%, its highest level in over a year

⛽ Motor fuel prices: Were the largest contributor to the monthly rise

📊 Monthly CPI change: Up 0.3%, compared to 0.2% the previous month

This hotter-than-expected reading has sparked debate over the Bank of England’s next move.

While a rate cut in August 2025 is still widely anticipated, the inflation uptick may prompt a more cautious approach thereafter.

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China suffers U.S. tariff driven falls in exports and increased deflation concerns

China exports to U.S. suffer due to tariffs

China’s economic landscape is facing mounting challenges as exports to the United States plummet and consumer prices decline, sparking fears of deflation.

The latest trade data reveals that Chinese exports to the U.S. fell by 34.5% in May 2025, marking the sharpest drop in over five years. This decline comes despite a temporary trade truce that paused most tariffs for 90 days.

China’s consumer prices have continued their downward trend, raising concerns about deflation and its long-term impact on the economy.

The sharp fall in exports is largely attributed to high U.S. tariffs and weakening demand. While China’s overall exports grew by 4.8%, shipments to the U.S. suffered significantly, reflecting the ongoing trade tensions between the two economic giants.

Imports from the U.S. also dropped by 18%, further shrinking China’s trade surplus with America. In response, Chinese exporters are shifting their focus to other markets, particularly Southeast Asia and Europe, where demand remains relatively strong.

China’s CPI reading

At the same time, China’s consumer price index (CPI) fell by 0.1% in May 2025, deepening concerns about deflation. Deflation, the opposite of inflation, can lead to lower corporate profits, wage cuts, and job losses, creating a vicious cycle of economic stagnation.

The decline in consumer prices is largely driven by weak domestic demand, exacerbated by the ongoing real estate crisis. Many Chinese consumers are hesitant to spend, fearing further declines in property values and economic uncertainty.

China’s rare earth materials olive branch

China appears to have offered U.S. and European auto manufacturers a reprieve after industry groups warned of increasing production threats over a rare earth shortage.

China’s Ministry of Commerce on Saturday 7th June 2025 reportedly said it was willing to establish a so-called ‘green channel’ for eligible export licence applications to expedite the approval process to European Union firms. 

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Japan’s core inflation rises to 3.5% – higher than expected

Japan economic data

Japan’s inflation figures for April 2025 have revealed a continued rise in consumer prices, with the Consumer Price Index (CPI) climbing 3.6% year-on-year.

This marks a sustained period of inflation above the Bank of Japan’s (BoJ) target of 2%, prompting speculation about potential interest rate hikes later in the year.

Core inflation, which excludes fresh food, rose 3.5% YoY, exceeding market expectations. A major driver of this surge has been food prices, particularly rice, which has soared by an astonishing 98% compared to last year.

The sharp increase has led the government to release emergency stockpiles to stabilise the market.

The BoJ faces a delicate balancing act. While inflation remains strong, economic uncertainty – partly fueled by U.S. tariffs, could complicate monetary policy decisions. The central bank has already raised rates in recent months but has paused further hikes to assess the broader economic impact.

With inflationary pressures persisting, analysts predict that the BoJ may tighten policy again by October 2025.

Concerns over global trade and domestic economic stability could influence the timing of any further rate adjustments.

The core inflation increase of 3.5% was far higher than expected.

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U.S. inflation rate at 2.3% in April 2025 – less than expected

U.S. inflation

April 2025 saw the U.S. inflation rate ease to 2.3%, marking its lowest level since February 2021.

The consumer price index (CPI) rose 0.2% for the month, aligning with expectations but slightly below the forecasted 2.4% annual rate.

Core CPI, which excludes volatile food and energy prices, also increased 0.2%, maintaining a 2.8% year-on-year rate.

Shelter costs, which make up a significant portion of the index, rose 0.3%, contributing to more than half of the overall inflation movement.

U.S. egg prices dropped 12.7%, though they remained 49.3% higher than a year ago.

The impact of Trump’s tariffs remains uncertain, with negotiations potentially influencing inflation trends in the coming months.

Court to judge on legality of ‘reciprocal’ tariffs

U.S. Court of International Trade is set to hear arguments in a case challenging President Donald Trump’s tariffs.

The lawsuit filed by five domestic businesses argues that the law Trump invoked to impose his ‘reciprocal’ tariffs does not actually give him the power he claims.

The Department of Justice maintains that that law ‘clearly’ authorises the president to impose tariffs.

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UK economy shows welcome signs of resilience with positive GDP growth and inflation relief

Union Jack flag and stocks charts

The UK economy displayed unexpected resilience in February 2025, with GDP growing by 0.5%.

This figure has exceeded market expectations and provided a welcome boost to UK economic confidence. The growth was fueled by robust activity in the services and manufacturing sectors, which helped counterbalance ongoing challenges in other areas.

February’s performance marks a recovery from the flat growth seen in January 2025, underscoring the adaptive capacity of businesses and consumers alike.

Adding to the positive momentum, the Consumer Prices Index (CPI) inflation rate eased to 2.6% in March 2025, down from February’s 2.8%.

The decline in inflation reflects a combination of factors, including falling fuel costs and stable food prices, which have alleviated pressure on household budgets.

This marks the lowest inflation level since late 2024 and aligns with the Bank of England’s goal of achieving price stability.

The interplay of stronger-than-expected GDP growth and easing inflation suggests a cautiously optimistic outlook for the UK economy.

While challenges persist, such as global economic uncertainties and lingering effects of Brexit, these latest figures indicate a potential turning point, despite the Chancellors autumn and spring ‘budgets’.

The UK government and market participants will be watching closely to see if this positive trend continues into the coming months.

See: Office for National Statistics (ONS)

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UK inflation higher-than-expected at 3% in January 2025

UK Inflation up

UK inflation rose sharply in January 2025 after airfares failed to fall by as much as usual and private school fees jumped.

The higher-than-expected inflation increase to 3% in the year to January 2025, from 2.5% in December 2024, means that consumer prices rose at the fastest rate for 10 months.

Why?

The U.K.’s inflation rate rose sharply to 3% in January, coming in above analyst expectations of a 2.8% reading, according to data released by the Office for National Statistics (ONS) on Wednesday 19th February 2025.

Core inflation, which excludes more volatile items such as energy, food, alcohol and tobacco prices, rose by 3.7% in the 12 months to January 2025, which was up from 3.2% in the previous month.

The ONS reported Wednesday 19th February 2025 that the largest upward contribution to the monthly change in the CPI came from transport and food and non-alcoholic beverages.

Interest rate reductions will likely pause on this news.

I wonder what spin the UK chancellor add.

Not good!

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U.S. core inflation rate slows to 3.2% in December 2024 – less than expected and sets off market feeding frenzy

Inflation

The U.S. Consumer Price Index rose by a seasonally adjusted 0.4% for the month, resulting in a 12-month inflation rate of 2.9%. This figure was consistent with forecasts.

Core CPI annual rate was 3.2%, down from the month before and slightly better than the 3.3% outlook.

Stock markets surged following the release as Treasury yields fell.

U.S. consumer price index

Year-on-year percent change – Jan. 2021 to Dec. 2024

U.S. core inflation (CPI) Year-on-year percent change  Jan. 2021–Dec. 2024
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U.S. Fed’s preferred inflation measure rises to 2.3% 

U.S. inflation

The Personal Consumption Expenditures (PCE) price index announced 27th November 2025, rose by 0.2% monthly, matching a 12-month inflation rate of 2.3%, aligning with expectations.

Core U.S. inflation recorded more robust figures, climbing 0.3% monthly and reaching an annual rate of 2.8%, but also in accordance with forecasts.

Consumer spending increased by 0.4% monthly, as expected, while personal income surged by 0.6%, exceeding the estimated 0.3%.

The Federal Reserve is now likely searching for economic clues on how to proceed at its next interest rate meeting.

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U.S. inflation rate at 2.6% in October 2024 as expected

U.S. inflation

In October 2024, the U.S. consumer price index rose by 0.2%, bringing the annual inflation rate to 2.6%, aligning with expectations, according to the U.S. Bureau of Labor Statistics.

The core CPI, which excludes food and energy, saw a monthly increase of 0.3% and an annual rate of 3.3%, also in line with projections.

For the month, the consumer price index, assessing a range of goods and services, went up by 0.2%. This increment raised the year-over-year inflation rate to 2.6%, a 0.2% increase from September 2024.

These figures matched estimates. When food and energy were excluded, the core CPI’s monthly rise was even more significant, at 0.3%, with an annual rate of 3.3%, confirming the forecasts.

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China’s PPI deflation deepens in September 2024

Economic data China

In September 2024, China witnessed a decline in consumer inflation rates and an intensification of producer price deflation, despite efforts to implement additional stimulus measures aimed at reviving weak demand and stabilizing economic activity

The consumer price index (CPI) rose by 0.4% from the previous year, a slowdown from the 0.6% increase observed in August, as reported by the National Bureau of Statistics (NBS) on Sunday 13th October 2024. This increase was below the 0.6% rise economists had forecasted.

Month-on-month, the CPI remained unchanged, contrasting with the 0.4% increase in August and missing the expected 0.4% rise.

The producer price index (PPI) registered a year-on-year fall of 2.8% in September 2024, a sharper decline than the 1.8% decrease in the previous month and exceeding the 2.5% drop projected by analysts.

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U.S. consumer prices rose by 0.2% in September 2024 – higher than expected at 2.4%

U.S. CPI

Over the past year, the rate of U.S. price increases accelerated unexpectedly in September 2024, as policymakers considered their decision on interest rates, as indicated in a U.S. Labor Department report on Thursday 10th October 2024.

Sticky U.S. inflation

The consumer price index (CPI), which measures the cost of goods and services throughout the U.S. economy, rose by 0.2% for the month, resulting in an annual inflation rate of 2.4%. Both figures were 0.1% than ‘forecast’.

When food and energy are excluded, the core prices saw a 0.3% increase for the month, leading to an annual rate of 3.3%. These core figures were also 0.1% above the ‘forecast’.

The report from the Bureau of Labor Statistics noted that the majority of the inflation rise – over three quarters of the increase was due to a 0.4% surge in food prices and a 0.2% rise in shelter costs.

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German inflation falls to 1.8% in September 2024

CPI data Germany

In September 2024, the German consumer price index softened to 1.8%, falling below expectations based on preliminary data from Destatis, the national statistics office.

Month-on-month, the preliminary harmonized CPI saw a slight decrease of 0.1%.

According to recent analysis, the last instance of the German harmonized CPI falling below 2%, the inflation target rate of the European Central Bank, was in February 2021.

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In August 2024 – U.S. consumer prices increased by 0.2% with core inflation exceeding expectations

U.S. CPI statistics

As anticipated in the U.S., prices rose in August 2024, while the annual inflation rate fell to its lowest point since February 2021, according to a Labor Department report on Wednesday 11th September 2024.

This development likely now paves the way for a Federal Reserve interest rate reduction next week but maybe by only 0.25% and not the 0.50% some pundits have predicted.

The consumer price index, which measures a wide array of goods and services costs throughout the U.S. economy, rose by 0.2% for the month, matching the consensus, as reported by the Bureau of Labor Statistics.

This increase brought the year-on-year inflation rate to 2.5%, a decrease of 0.4 percentage points from July 2024 and slightly below the 2.6% prediction.

Nevertheless, the core CPI, which omits the more fluctuating food and energy prices, saw a 0.3% rise for the month, just above the 0.2% projection. The annual core inflation rate stood at 3.2%, consistent with expectations.

Data: U.S. Bureau of Labor Statistics
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China’s Consumer Price Index (CPI) climbs by 0.6% – less-than-expected

China flag and charts

On Monday 9th September 2024, China announced that its consumer price index (CPI) increased by 0.6% year-on-year in August 2024, falling short of expectations and due mainly to decreasing costs in transportation, home goods, and rents.

The consumer price index was projected to rise by 0.7% year-on-year in August 2024, based on a poll. However, the producer price index experienced a decline of 1.8% year-on-year in August, exceeding the analysts’ forecast of a 1.4% decrease.

China’s inflation rate increased by 0.6% year-on-year, which was below the 0.7% economists had anticipated according to a Reuters poll. Month-on-month, the Consumer Price Index (CPI) saw a rise of 0.4%, also falling short of the expected 0.5%.

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U.S. inflation slows in July 2024

U.S. inflation

U.S. consumer prices (CPI) increased at the slowest rate in over three years last month, further supporting the argument for the Fed to begin reducing interest rates.

According to the U.S. Labor Department, prices climbed 2.9% in the 12 months leading up to July 2024, marking the smallest yearly rise since March 2021 and a decrease from 3% in June 2024.

The monthly inflation report was under intense scrutiny following indications of weaker-than-anticipated job growth in July, which earlier this month led to upheaval in the stock market and concerns about a recession.

Analysts have suggested that these figures should persuade the Federal Reserve that the elevated borrowing costs are effectively bringing inflation back to its target levels, despite the recent increases in housing and food prices.

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UK inflation rate climbs to 2.2%

UK inflation

The UK’s inflation rate has risen for the first time this year, official ONS figures show.

This indicates that overall prices increased by 2.2% in the year leading up to July, a rise from 2% in June, surpassing the Bank of England’s target.

The anticipated increase is primarily attributed to the less significant drop in gas and electricity prices compared to the previous year.

The Bank of England reportedly anticipates a further increase in inflation this year before it declines again.

The core inflation rate, which is the Consumer Price Index (CPI) excluding food, energy, alcohol, and tobacco prices, was reported at 3.3% in July, a slight decrease from 3.5% in June, according to the statistics office.

Additionally, service inflation, which the Bank of England (BoE) monitors closely, decreased to 5.2% in July from 5.7% the previous month, yet still remains elevated.

These inflation statistics follow the release of data on Tuesday 13th July 2024, which revealed that the average wage growth excluding bonuses was 5.4% from April to June year-on-year, the lowest in two years.

Concurrently, the unemployment rate dropped to 4.2% during this period, down from 4.4% between March and May 2024.

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U.S. inflation falls 0.1% from May to June 2024 further adding to speculation of an imminent Fed rate cut

Sale

The Consumer Price Index (CPI), a comprehensive gauge for goods and services costs, saw a 0.1% decrease from May 2024, bringing the annual rate to 3%, which is near its lowest point in over three years.

When removing the unstable food and energy prices, the core CPI rose by 0.1% monthly and 3.3% annually. This year-over-year core rate increment is the least since April 2021.

Inflation for the month was tempered by a 3.8% drop in gasoline (petrol) prices, which balanced out the 0.2% rises in both food prices and housing costs.

Date: U.S. Bureau of Labor Statistics

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China’s inflation data missed projections – rising 0.2% in June 2024

China CPI data

China’s consumer price inflation rose by 0.2% in June 2024 from a year ago, falling short of expectations. Meanwhile, producer prices remained in line with forecasts.

Main points

Consumer Price Index (CPI)

China’s CPI was expected to rise by 0.4% year-on-year in June, according to poll conducted by Reuters. However, the actual increase was only 0.2%. Lacklustre domestic demand has contributed to keeping inflation subdued in China, unlike major economies such as the U.S., where prices have remained elevated.

Producer Price Index (PPI) 

The PPI, which measures factory-gate prices, dropped by 0.8% from a year ago, aligning with expectations. This reflects the ongoing challenges faced by manufacturers and businesses.

Core CPI

Stripping out more volatile food and energy prices, core CPI rose by 0.6% year-on-year in June. While this is slightly slower than the 0.7% increase for the first six months of the year, it indicates a relatively stable inflation trend.

Pork and beef

Notably, pork prices surged by 18.1% in June compared to a year ago, while beef prices fell by 13.4%.

In summary, China’s inflation remains subdued due to weak demand, even as other global economies experience higher price pressures. Policymakers will closely monitor these trends to ensure economic stability.

Note: this information is based on data from the National Bureau of Statistics and reflects the situation as of 10th July 2024.

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U.S. Supercore inflation measure indicates Fed may have a problem

Markets have fretted about core inflation recently, now analysts are concerned about a highly specific price gauge within the data – ‘supercore’ inflation.

This measure tracks services inflation, excluding food, energy, and housing, which has recently surged, rising 4.8% year-over-year in March 2024 and over 8% on a three-month annualised basis.

The situation is further complicated as some of the most persistent elements of services inflation include essential household expenses such as car and housing insurance, along with property taxes. Wall Street was unsettled by a recent consumer price index report that exceeded expectations, yet the focus is on the ‘supercore’ inflation reading within the data.

Economists also analysed the core CPI, which omits the volatile prices of food and energy, to discern the true inflation trend. The ‘supercore’ gauge goes a step further by also removing shelter and rent costs from its services calculation.

Federal Reserve officials find this measure particularly useful in the current environment, viewing the spike in housing inflation as a transient issue rather than a reliable indicator of underlying price trends.

Supercore inflation accelerated to a 4.8% pace year over year in March 2024, the highest in 11 months.

Sticky inflation problem

Adding complexity to the situation is the declining consumer savings rate coupled with rising borrowing costs, which may compel the central bank to maintain a restrictive monetary policy “until something breaks,” according to Fitzpatrick.

Analysts warn that the Federal Reserve may struggle to reduce inflation through additional rate hikes, as the prevailing factors are more persistent and less responsive to stringent monetary policy.

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U.S. markets unfazed by hot CPI data

U.S. Flag

Despite the recent surge in the Consumer Price Index (CPI), and better than expected PPI data, markets have shrugged off any concern… for now

Fickle

On Wednesday 10th April 2024 the CPI data announcement pushed the markets down and on Thursday 11th the markets recovered after the PPI data was better than expected.

CPI Report for March 2024

  • Both headline and core CPI rose by 0.4%, surpassing forecasts.
  • Bond markets are now cautious about potential rate cuts, shifting from a floor of three cuts to a possible ceiling.
  • Groceries’ inflation has eased, but housing costs remain a pressure point.
  • Fed policymakers closely monitor Supercore services inflation.
  • Solid wage gains continue to impact prices.

Producer Price Index (PPI)

PPI increased by 0.6% in February 2024. Expectations persist for June rate cuts by the Federal Reserve.

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U.S. consumer prices rose 0.4% in February 2024 and 3.2% from a year ago

U.S. inflation

The U.S. Consumer Price Index, a comprehensive gauge of the cost of goods and services, rose by 0.4% for the month and increased by 3.2% compared to the previous year.

The annual rate was marginally higher than expected. The monthly rate was slightly above the forecast of 0.3%. This may likely direct the Federal Reserve to hold off on an interest rate reduction, at least until the summer of 2024. What will Wall Street make of it?

The core Consumer Price Index increased by 0.4% monthly and recorded an annual rise of 3.8%. Both figures exceeded forecasts by one-tenth of a percentage point.

An increase of 2.3% in energy costs contributed to the rise in the overall inflation figure. Food prices remained mostly unchanged for the month, while housing expenses saw a further increase of 0.4%.

U.S. consumer price index data for February 2024 – Month on month
U.S. consumer price index data for February 2024 – Year on year
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Is the fight against inflation failing – or does it get much harder towards the end?

Stubborn inflation

Is progress on U.S. inflation stalling?

That’s the fear spreading through Wall Street as another inflation reading on Friday 16th February 2024 came in hotter-than-expected.  

The producer price index rose 0.3% in January 2024. The largest increase since August 2024 and higher than the 0.1% forecast. Excluding food and energy, core PPI jumped 0.5%, again well above consensus.

Stubborn

It is yet another sign of stubborn price pressures across the broader U.S. economy. And it came just days after an unexpectedly hot CPI reading, which gave markets a nasty jolt.  

Both data have stoked investor worries on whether inflation is firmly under control. The latest developments also reinforce the Fed’s caution that it will need to see more evidence of disinflation before committing to lower rates.

Mohamed El-Erian, Allianz chief economic advisor, posted on X that like the CPI data, the PPI report was a further indication that the last mile of the inflation battle is more complex than many had assumed (and still assume).

Some economists even argue the jump in Friday’s data will likely push January’s personal consumption expenditures price index, the Fed’s preferred inflation gauge.

The PPI data means we can finalise our core PCE forecast for January, at 0.32%. That would be the biggest increase since September. But the three months since then all saw much smaller gains.

But investors will have to wait until later this month for PCE data when it’s released on 29th February 2024.

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U.S. inflation ticks back up to 3.1%

Chart

Stocks dropped on Tuesday 13th February 2024 after hotter-than-expected inflation data for January caused Treasury yields to spike

The new inflation figure raised doubts that the Federal Reserve would be able to cut rates several times this year, a key part of the equity market bull run case.

The consumer price index rose 0.3% in January 2024 from December 2023. CPI was up 3.1% year-to-year. Economists expected CPI to have increased by 0.2% month over month in January and 2.9% from a year earlier.

U.S. inflation ticks back up in January 2024 figures