US CPI Inflation Surged to the Highest Levels in 40 Years

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US CPI Inflation

Headline Consumer Price Index (CPI) jumped 7.5% year-over-year in January, from 7% in December, marking the largest 12-month increase since the period ending February 1982.

Core CPI (ex food and energy) surged 6.0% year-over-year, compared to 5.5% prior, the highest since the period ending August 1982.[1]

Persistently high Inflation is the main driver behind the Federal Reserve's recent hawkish pivot. The US central bank is due to end its asset purchase program in early March and has pointed to rates lift-off in the same month and multiple hikes ahead.

Today's data are supportive of the Fed's tightening path and may put pressure for a larger 50 basis point rate increase, which has emerged as a key theme in the public discourse recently. We have to note though, that the Fed's preferred measure of Inflation is the Core Personal Consumption Expenditures (PCE).

The US Dollar jumped immediately after the release, while stock markets are negatively affected. The tech sector is particularly vulnerable to high inflation/high interest rates environments, with NAS100 having shed nearly 10% in January and losing around 1.5% today at the time of writing.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.

References

1

Retrieved 01 Jul 2022 https://www.bls.gov/news.release/cpi.nr0.htm

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