The latest US consumer price index (CPI) data has caused significant turbulence on the financial markets. The January inflation figures, published in February 2025, exceeded analysts' expectations, prompting sharp reactions from investors.
The rise in inflation and its consequences
In January 2025, US CPI inflation reached 3% year on year, the first such result since June 2024. Particularly worrying are the monthly dynamics and the fact that so-called "supercore" inflation, regarded as a measure of the persistence of price pressures, rose by more than 0.7% in January. These figures suggest that inflationary pressure may be more lasting than previously assumed.
Financial market reactions
In response to this news, the financial markets reacted nervously. The price of Bitcoin fell below USD 95,000, losing around USD 2,000 within a few minutes. Similar falls were recorded in futures on Wall Street indices and in the precious metals markets. The yields on 10-year and 2-year US Treasury bonds rose by more than 10 and 7 basis points respectively, reaching 4.64% and 4.36%. The US dollar strengthened, which further contributed to capital outflows from riskier assets.
Detailed data
The detailed figures are as follows:
- CPI year on year: 3% (forecast: 2.9%; previously: 2.9% in December 2024)
- CPI month on month: 0.5% (forecast: 0.3%; previously: 0.4% in December 2024)
- Core CPI year on year: 3.3% (forecast: 3.1%; previously: 3.2% in December 2024)
- Core CPI month on month: 0.4% (forecast: 0.3%; previously: 0.2% in December 2024)
Following the publication of these figures, investors pushed back the expected date of the Federal Reserve's first interest rate cut from September to December 2025. In October last year, the market had anticipated as many as five rate cuts in 2025, but the current data suggests a more cautious approach.
Analysis of inflation components
The rise in inflation was driven by several key factors:
- Energy: Energy prices rose by 1.1% in January, with petrol prices up by 1.8% and natural gas also up by 1.8%.
- Food: The food price index rose by 0.4% in January. Particularly significant was the 1.9% increase in the price of meat, poultry, fish and eggs, with egg prices alone jumping by 15.2%, the largest monthly increase since June 2015.
- Services: Prices of recreation services rose by 1%, and prices of used cars and trucks rose by 2.2% in January.
Outlook
The current data points to growing inflationary pressure, which may prompt the Federal Reserve to take a more hawkish approach to monetary policy. Investors will closely follow further macroeconomic data releases and Fed communications in order to adjust their investment strategies to changing market conditions.
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