U.S. Inflation Beats Forecasts as Powell Stresses Tight Policy: The annual inflation rate in
The United States accelerated beyond expectations in January,
Reinforces the likelihood that the Federal Reserve will maintain high interest rates for longer.

According to data released on Wednesday, the annual Consumer Price Index (CPI) inflation rose to 3%,
surpassing forecasts of 2.9%.
Meanwhile, core inflation, which excludes food and energy prices,
remained steady at 3.3%, while expectations pointed to a slowdown to 3.2%.

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Inflation Data Impact
Fed Decisions

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Every month, the CPI increased by 0.5% in January,
compared to gains of 0.4% and 0.3% in the previous two months.
The core index also rose by 0.4%, following a slowdown to 0.2% in December.

Higher housing costs, transportation services, and new and used vehicle prices primarily drove these increases.
In contrast, clothing prices declined, and healthcare costs remained stable.
Meanwhile, food prices increased by 0.4% monthly, compared to 0.3% in December,
while energy prices dropped by 1.1% after rising 2.4% in the previous month.

Inflation Data Impact on Interest Rate Expectations

The inflation data affected investor expectations regarding interest rate cuts,
with projections for two rate cuts this year shrinking to just one amid uncertainty over the impact
of President Donald Trump’s trade and immigration policies on the economy.

Futures markets now price in a 40.1% probability of a 0.25% rate cut at the Fed’s December 2025 meeting,
up from 37% the previous day and 28.5% a week earlier.
Meanwhile, expectations for holding rates steady at the September 2025 meeting rose to 41.9%, compared to 29.9% the previous day.

Powell: Fed Decisions Will Not Be Influenced by Trump’s Calls for Rate Cuts

Federal Reserve Chair Jerome Powell, speaking before the U.S. Congress on Wednesday,
reaffirmed that Trump’s calls for interest rate cuts will not influence the central bank’s decisions.

“You can trust that we will continue to make decisions based on economic data, not political pressure,
” Powell stated. He emphasized that the Fed’s monetary policy will remain restrictive to curb demand and control inflation,
noting that recent inflation data aligns with progress toward the target but still falls short of the desired level.

Responding to a question from Democratic Representative Maxine Waters,
Powell denied any communication with Elon Musk,
Who is leading efforts to cut federal spending as part of the so-called “Department of Government Efficiency”

Trump had called for interest rate cuts while imposing new tariffs
before the January inflation report confirmed persistent price pressures.

U.S. Inflation Beats Forecasts as Powell Stresses Tight Policy

U.S. Inflation Beats Forecasts as Powell Stresses Tight Policy

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