We finally have the CPI data for January 2023, and it seems that inflation is still above the forecasts. However, the growth rate of inflation has slowed down a little bit during January, but it is still high.
And after the recent CPI readings, it seems that the Fed still has a lot of work to do to tame inflation in the country.
According to the data from the labor department, the CPI reading was 6.4% in January. When compared with a reading of 6.5% last month (December), it seems that inflation has indeed slowed down.
Overall, this marks the 7th month of deceleration in inflation, but the current reading of 6.4% was still higher than the expected value of 6.2%.
In other words, inflation is slowing down, but its pace is not what the market was expecting it to be... As a result, we might have to wait for more time before we can see any rate cuts from the Fed!
If we look at the yearly core inflation data, it is around 5.6%, which is a 0.1% reduction from the earlier reading of 5.7%. However, even that was higher than the market's expectations of 5.5%!
As far as Fed officials are concerned, core inflation provides a very accurate assessment of the current inflation situation in the country.
And if we look at inflation on a monthly basis, an increase of 0.5% was witnessed, which is similar to the market expectations.
So far, the Fed is on an aggressive path where the interest rate was raised from a near-zero value to around 4.75% in a short span of time. And the sole reason behind this action by the Fed is to control the rising prices of different items.
However, the current readings have made it clear that inflation has peaked and is now on its way down. But the question still remains on how long the Fed will keep the rates at high levels. And more importantly, how long we will have to wait to see the first rate cut?