Analysis-Hotter January Inflation Jolt Market reduces dimming rate wishes
Davide Barbuscia and Saqib Iqbal Ahmed
NEW YORK (Reuters) – Surprisingly strong US inflation in January makes investors fear that the heating economy and looming tariffs will corner the Federal Reserve, lower interest rate hopes and even pose a threat to hiking .
US consumer prices have risen more than expected in January. In particular, central banks are not in a hurry to resume interest rate cuts, as economic uncertainty is exacerbated by the expected inflation effects of the US president’s tariffs on major US trading partners.
Fed Chairman Jerome Powell said in Congress this week that the Fed is ready to ensure that fees do not change until inflation resumes decline. However, hot inflation readings are likely to complicate efforts to game out when investors could potentially lower interest rates again, with the next move likely to be hiking involving price pressure. Some have begun to express concern that there is.
“We’re looking forward to seeing you get a better understanding of how we’re doing,” said Erik Aarts, senior bond strategist at Touchstone Investments.
Aarts said it plans to maintain a small financial “underweight” position where value increases as interest rates fall. However, he remained bullish on corporate debt, in response to expectations of continued economic strength.
Future traders of interest rates were betting on a 25 basis point reduction in just one Fed in the second half of inflation data, from the expected easing of around 36 basis points in 2025 ahead of release. The US Treasury benchmark for 2010, reflecting economic growth and inflation expectations, rose above 10 basis points, at 4.65%, the highest in three weeks.
The Benchmark S&P 500 Stock Index fell Wednesday as inflation data reversed expectations for broad support for stocks from low-limit monetary policy.
“Our basic incidents slowed growth and slowed inflation,” said Jack Ablin, chief investment officer at Cresset Capital.
The chances of rates staying longer than expected means that large companies with large cash flows can become more attractive, with investors coming from the so-called 7 grand tech stocks to a wider market We were able to stop the transition.
“I want to see the spread, but I think this is really a setback against that trend,” Ablin said.
Customs background
Trump’s protectionist policy exacerbated market fears of sustained rebounds of inflation as it imposed an additional 10% tariff on Chinese products while halting 25% tax on goods from Canada and Mexico until March I let it go.