US CPI Data Suggests Covid-19 Continues to Dampen Inflation— For Now

Consumer prices rose slightly in January, while underlying inflation remained stagnant as the pandemic continues to ravage the US economy.

According to latest data released by the US Labour Department on Wednesday, the consumer price index increased by 0.3% in January, following a rise of 0.2% in the prior month. In the meantime, the core CPI, which measures price changes excluding food and energy costs, increased by 1.4% over the 12-month period, slightly missing economists’ expectations of 1.5%.

Of the notable declines, Food-at-home and Used car prices dropped by 0.1% and 0.9% respectively in January, despite strong demand for both amid the pandemic. Likewise, rent and shelter inflation continues to show signs of a slowdown, falling to the lowest level since August 2011. Rent prices dropped from 1.84% to 1.62% in January on a year-over-year basis, meanwhile shelter inflation declined from 2.28% in December to 2.05% last month — all despite historically-high housing prices…

Notably, Goods inflation skyrocketed in January, reaching the highest level since April 2012, meanwhile service inflation sunk to the lowest since November 2010. In response, US Treasury yields declined following the news on Wednesday, with the benchmark 10-year Treasury note dropping to 1.136%, while the Treasury bond remained at 1.928%.

The latest CPI data points to the growing debate in financial markets regarding the impending path of inflation. Despite the relatively modest January figure, price pressures are expected to inflate over the coming months, especially amid expectations that Congress will likely pass yet another stimulus package. Lawmakers are still debating the size of the next relief package, with President Joe Biden proposing a $1.9 trillion plan — something that many economists are warning will certainly spur a sudden outbreak of inflation.

Information for this briefing was found via the BLS and Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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