U.S. consumer prices showed higher-than-expected growth last month, while the underlying inflation added the biggest over a year, solidifying forecasts that price pressures will pace up in 2018 and possibly intensify interest rate hikes by the Fed.
Today’s report by the Labor Department demonstrating rather robust inflation could be an additional pressure on US financial markets, which were concerned by a strong yearly wage growth in January.
Worries over inflation catalyzed a sell-off on Wall Street and sent up U.S. Treasury yields to record highs in four years.
Inflation, possibly pushed by a tightening jobs market and big government expenditure, could lead to a more active policy in terms of raising rates in 2018 on the part of the Fed.
This would cause economic growth to decelerate. Consumer Price Index of the Labor Department jumped 0.5% in January when households spent more on fuel, rent and healthcare. December’s growth of the CPI had been 0.2%.
The CPI remained the same 2.1% compared to the corresponding period of the preceding year as the big price rises from last year weren’t taken into account in the calculation.