US: At 7.5%, annual inflation in January exceeded forecasts

Inflation continued to revive in January in the US, with consumer prices remaining high at 40 years, giving new impetus to estimates that the Federal Reserve will be forced to take a more aggressive approach to tightening its policies in the coming months.

In particular, the consumer price index climbed 7.5% from a year earlier, after an annual increase of 7% in December, as announced today by the US Department of Labor. This is the highest level since 1982.

On a monthly basis, inflation increased by 0.6%.

Excluding food and energy, the construction index rose 6% from the same period last year – also the most since 1982 – and 0.6% from December.

Analysts’ average estimates in a Bloomberg poll put annual inflation at 7.3%, up 0.4% on a monthly basis.

The dollar strengthened after the announcement of inflation data that opens the door to more aggressive interest rate hikes by the US Federal Reserve.

In particular, the dollar index, which reflects the course of the US currency against its six main competitors, is strengthening by 0.2%.

The euro fell 0.2% against the dollar to 1.1392 while the US currency gained more than 0.5% against the yen.

Yields on bonds are also moving upwards. The 10-year yield in the US gains more than 6 basis points at 1.995%, while earlier it climbed up to 2%. This is the first time since August 2019 that it reaches this level.

The two-year performance records a jump of 12.3 bp. at 1.471%, while at 30 years it adds 5.1 bp. at 2.283%.

Markets are expecting a rise in US interest rates at the next Fed monetary policy meeting on March 15-16 by at least 25 basis points. with several analysts no longer ruling out the possibility of an increase of 50 bp.