On Tuesday (February 13th) local time, the latest announcement of a lower than expected decrease in the overall inflation rate in the United States failed to enter the "Age 2" as expected by the market.
The specific data released by the US Department of Labor shows that the quarter on quarter Consumer Price Index (CPI) in the United States rose by 0.3% in January, the largest increase since September last year, higher than December last year and market expectations of 0.2%;
This resulted in a year-on-year growth rate of 3.1% in January, the lowest level since June 2023, but higher than market expectations of 2.9%, compared to 3.4% in December last year.
On the sub item data, food prices increased by 0.4% month on month and 2.6% year-on-year; Energy prices decreased by 0.9% month on month and 4.6% year-on-year, with gasoline prices decreasing by 3.3% month on month and 6.4% year-on-year; Fuel prices decreased by 4.5% month on month and 16.2% year-on-year.
Excluding unstable factors such as fuel and food, the core CPI increased by 0.4% month on month, the largest increase since May last year, slightly higher than the market's expected 0.3%, and a year-on-year increase of 3.9%, the lowest level since May 2021. However, the market originally believed it would drop to 3.7%.
Upon closer inspection of the sub items, the year-on-year growth rates of transportation services (9.5%) and housing (6.0%) significantly outperformed the core CPI. Although both items have decreased compared to December last year, analysis suggests that the January data adopted a new weighting, namely an increase in the proportion of housing, which may explain to some extent why the data was stronger than expected.
Analyst Katia Dmitrieva also mentioned that the "super core price" that the Federal Reserve is particularly concerned about, excluding housing prices, seems to be stronger in core service prices. This indicator increased by 0.85% month on month and 4.3% year-on-year, marking the largest growth since April 2022 and May 2023, respectively.
After the data was released, there was also a significant change in market expectations for the Federal Reserve's interest rate cut path. According to the "Federal Reserve Watch" tool of the ChiNext, traders believe that the probability of the bank maintaining its current interest rate level in May is close to 60%, compared to 40% before the data was released.
The yield of US 10-year treasury bond bonds, the "anchor of global asset pricing", jumped more than 10 basis points; The 2-year US Treasury yield, which is most closely related to the Federal Reserve's interest rate expectations, has also rebounded to a new high since December 13, 2023; The US dollar index rose by 70 points to around 104.80, the highest level in nearly three months.
Brian Jacobsen, Chief Economist of Annex Wealth Management, said that the slightly hot CPI has indeed made investors feel chilly. "The Federal Reserve does not have a coherent set of interest rate cutting standards, and we all know that the timing of the rate cut may be delayed."
Last month, the Federal Reserve announced that it would maintain the target range of the federal funds rate at 5.25% to 5.50% unchanged. At the press conference, Powell stated, "I don't think we can gain enough confidence at the March meeting to confirm that interest rate cuts will begin in March."
Jacobsen added, "If interest rate cuts are a game of confidence, we don't know when we can gain enough confidence to cut rates, or if a slight rebound in inflation will weaken their confidence in taking rate cuts. This undoubtedly increases the volatility of bonds."