US Inflation Unexpectedly Softens, Dollar Strengthens

In January 2024, the US annual inflation rate decreased to 3.1%, down from December’s 3.4%, yet surpassing expectations of 2.9%. The Consumer Price Index (CPI) showed a 0.3% increase from the prior month, exceeding forecasts of 0.2%.

Core inflation remained steady at 3.9% annually, defying expectations of a slowdown to 3.7%, with a monthly rise to 0.4%.

Housing prices drove much of the increase, rising 0.6% month-on-month and contributing over two-thirds of the headline rise. Over 12 months, housing prices surged by 6%. Food prices also saw a 0.4% increase, partly offset by a 0.9% decrease in energy prices, largely due to a 3.3% drop in gasoline prices.

The release led to a sharp decline in stock market futures, with Dow Jones Industrial Average futures dropping over 250 points, while Treasury yields rose.

This unfolds amid the Federal Reserve’s deliberations on 2024 monetary policy, with markets eagerly anticipating potential interest rate cuts. The US Dollar (USD) gained strength, with the US Dollar Index rising by 0.65% to 104.80.