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Last week, January’s US inflation print cooled excitement around early interest rate cuts. Headline inflation fell to 3.1% year-on-year while core remained flat at 3.9%, although both were stronger than consensus expectations. Some of this strength can be ascribed to annual January price resetting, yet month-on-month increases across several areas of core services point to lingering domestic price pressures. While investors shouldn’t read too much into a single datapoint, this release is a reminder that the process of inflation normalisation may prove slower and bumpier than many assumed coming into 2024. The Federal Reserve has indicated that it needs more confidence in the trajectory of inflation before considering rate cuts. This confidence may yet be gained by the summer, but there was little in last week’s data to suggest that rates will imminently move lower.
US inflation remains stickier than expected
US goods and services inflation, % change year on year
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