Topline
Inflation was higher than anticipated in January, according to the Bureau of Labor Statistics’ consumer price index report released Wednesday morning, with one grocery item contributing noticeably to higher prices, causing stocks to decline considerably.
Egg prices have contributed to more expensive grocery prices for Americans.
Key Facts
Headline annual CPI inflation was 3% last month, compared to consensus economist forecasts of a 2.8% price increase from January 2024 to January 2025, according to Dow Jones.
Consumer prices rose 0.5% from December to January on a seasonally adjusted basis, worse than estimates of a 0.3% month-over-month rise.
The arguably more important measure of core inflation, which excludes price changes in the often volatile food and energy categories, increased 3.3% year-over-year in January, higher than forecasts of 3.1%.
And core prices rose 0.4% from December to January, compared to estimates of 0.3%.
Surprising Fact
The 0.5% price increase from December to January marked the worst month-over-month inflation since August 2023.
Chief Critic
“BIDEN INFLATION UP,” President Donald Trump wrote on his his Truth Social platform following the release. The Labor Department collects data throughout the month, meaning about a third of the prices captured in January came after Trump’s inauguration.
Egg Prices Soar 15%
The price of eggs rose 15.2% from December to January on a seasonally adjusted basis, and 53% from January 2024 to last month, as bird flu ravages the national supply of eggs. That helped boost the CPI’s food at home annual inflation sub-index to 1.9%, its highest reading since October 2023. This was the largest increase in egg prices in 10 years, contributing roughly two-thirds of all grocery inflation, according to the government.
Key Background
Headline inflation was 2.9% and core inflation was 3.2% in December, in line with economist forecasts. Inflation remains well above its widely accepted target of 2%. Still, it’s come down considerably since headline CPI inflation peaked at a four-decade high of 9.1% in 2022, and January was the seventh consecutive month with inflation below 3%. With inflation still above its ideal rate, and concerns about the potential price increases associated with Trump’s tariffs, the Federal Reserve has distanced itself from enacting further interest rate cuts in the near term, keeping borrowing costs at a historically high level.
Stocks Drop On Hot Cpi Inflation
Bond and stock markets alike sold off on the hot inflation report, as it dimmed prospects of lower rates. Each of the three major U.S. stock indexes — the Dow Jones Industrial Average, the S&P 500 and the Nasdaq — fell about 1% in early trading, while yields for the benchmark 10-year U.S. Treasury bond rose about 10 basis points to a three-week high (higher yields mean less valuable existing bonds). “The hotter than expected CPI confirms investors’ anxiety regarding too-hot inflation that will keep the Fed on the sidelines,” Sameer Samana, senior global markets strategist at Wells Fargo Investment Institute, wrote in emailed comments. Investor hopes for a rate cut at the Fed’s next meeting all but evaporated, as the market-implied odds of a March cut declined from 5% to less than 1% after the report, according to CME Group data.
Trump Repeats Call For Rate Cuts
Ahead of the CPI release, Trump posted: “Interest Rates should be lowered, something which would go hand in hand with upcoming Tariffs!” Trump previously said he’d “demand” rate cuts, which are determined by the Fed, not the president.
