The US Consumer Price Index (CPI) rose 7.5% in January from a year ago. This is not only far above market expectations, but also the largest increase in 40 years since 1982. Energy prices rose 27% from a year ago, leading to inflation.
Higher-than-expected inflation is expected to put pressure on the U.S. central bank to speed up interest rate hikes. The U.S. financial market is predicting more than five rate hikes within this year, and observers say it will carry out a “big shot” of raising interest rates by 0.5 percentage points at a time in March to dampen inflation.
The US Department of Labor said on the 10th (local time) that the CPI rose 7.5 percent in January from the same month last year and 0.6 percent from the previous month.
This is an increase from December last year (7%), exceeding Bloomberg’s expert forecast of 7.3%. The growth rate compared to the previous month also exceeded the expert forecast of 0.4%.
Excluding highly volatile energy and food, the core consumer price index rose 6.0 percent from the same month last year and 0.6 percent from the previous month, respectively. The core CPI growth rate also exceeded the market forecast of 5.9% year-on-year and 0.4% month-on-month.
Inflation in food, energy, and housing drove all-round inflation. Fuel oil prices jumped 9.5% month-on-month and 46.5% year-on-year, the highest increase. Gasoline prices rose 40% year-on-year, natural gas 23.9%, and electricity bills 10.7%, respectively. Overall energy costs rose 0.9% from the previous month and 27% from a year ago.
New car prices remained unchanged compared to the previous month, but rose 12.2% year-on-year.
Prices of used cars, which served as the main culprit of inflation in the first half of last year, soared 40.5 percent year-on-year last month, but rose only 1.5 percent from the previous month.
Housing costs, which account for one-third of the total CPI, rose 0.3% from the previous month. It is the lowest increase since August last year, but it is up 4.4 percent from a year ago.
As prices jump higher than expected, it is observed that the pace of interest rate hikes by the Federal Reserve, the U.S. central bank, will accelerate and the water level will rise. Nevertheless, a sharp rate hike could hurt economic growth and employment, so the Fed is expected to closely monitor related economic indicators before the Federal Open Market Committee’s regular meeting.
The U.S. CNBC said the financial market reflects interest rate hikes in advance, adding that the Fed’s probability of raising its key interest rate by 0.5% in March rose from 25% before the release of price statistics to 44.3% after the announcement. In addition, CNBC added that the probability of raising 0.25% six times this year has increased from about 53% to about 63%.
