RTR: January CPI accelerates, but trend easing

REUTERS reports:

U.S. consumer prices increased from the prior month in January but met expectations, while the underlying trend showed inflation is slowing, likely keeping the Federal Reserve on a modest path of interest rate hikes.

The consumer price index (CPI) rose 0.5% last month, the Labor Department said on Tuesday. Data for December was revised higher to show the CPI gaining 0.1% instead of the 0.1% fall as previously reported. In the 12 months through January, the CPI increased 6.4% after advancing 6.5% in December. Economists polled by Reuters had forecast the CPI climbing 0.5% for January and rising 6.2% year-on-year.

COMMENTS:

ATHANASIOS VAMVAKIDIS, GLOBAL HEAD OF G10 FX STRATEGY, BANK OF AMERICA, LONDON

“Month-over-month as expected, but upward revisions for last month brought year-over-year numbers above expectations. This should keep the USD strong. Inflation in the US is clearly sticky. This will keep the Fed policies on track, keeping the USD strong — not necessarily stronger. The big picture is that the inflation data clearly show that the market is too optimistic about inflation dropping enough this year to allow the Fed to start cutting rates. This suggests the USD may not weaken by as much as market expect, if at all.”

JANE FOLEY, HEAD OF FX STRATEGY, RABOBANK LONDON, LONDON

“The US CPI inflation print triggered an initial bout of volatility for the USD with the as expected m/m data being confounded by a stronger than expected y/y number. However, the DXY index is now little changed from its pre-data levels…”

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