Advertisement
When should a housing society in Mumbai start considering re...
From GST on JDAs to SEBI’s REIT reclassification and the S...
Stay ahead in the world of real estate with our daily podcas...
Stay ahead in the world of real estate with our daily podcas...
January inflation data in the US came in softer than expected, strengthening the case for interest rate cuts by the Federal Reserve later this year. Consumer prices rose modestly on a monthly and annual basis, easing concerns of renewed inflationary pressure. Market reactions were measured, with bond yields edging lower and equities largely unchanged. While economists acknowledged ongoing risks from labour strength and underlying services inflation, the overall trend of disinflation remains intact, keeping monetary easing firmly on the table.
US consumer inflation slowed more than expected in January, reinforcing expectations that the Federal Reserve is likely to lower interest rates later this year. Official data showed consumer prices rose 0.2% during the month, easing from a 0.3% increase in December. On an annual basis, inflation stood at 2.4%, coming in below market expectations of 2.5%. Advertisement
The data release, which faced a slight delay due to a brief federal government shutdown last week, was seen as a positive signal for policymakers who have been closely monitoring price stability alongside labour market strength. Inflation remains above the Fed's long-term target of 2%, but the latest reading suggested that price pressures are not accelerating.
Financial markets reacted cautiously. US stock futures traded flat to marginally lower following the release, while US Treasury yields edged down. The benchmark 10-year Treasury yield slipped to around 4.075%. In currency markets, the dollar index remained largely steady, trading slightly higher near 96.93.
Market participants broadly viewed the data as supportive of eventual monetary easing. Phil Orlando of Federated Hermes said the inflation reading was better than anticipated, particularly at the headline level, and aligned with expectations that the Fed could reduce rates multiple times over the coming year. He noted that recent volatility in markets reflected concerns that strong labour data could delay rate cuts, but easing inflation keeps the broader downward trajectory intact.
Some investors highlighted mixed signals within the data. Brad Conger of Hirtle, Callaghan & Co. pointed to wide variation across inflation components, suggesting the economy is responding to both supply constraints and areas of abundance. He added that such divergence does not point to a sustained inflationary trend and continues to support exposure to interest rate-sensitive sectors such as housing and real estate.
Others urged caution. Brent Schutte of Northwestern Mutual Wealth Management said the report does not significantly alter the Fed's outlook, noting that policymakers remain focused on labour market conditions. While recent job data appeared strong on the surface, underlying details showed hiring concentrated in non-cyclical sectors such as healthcare and social assistance.
Josh Jamner of ClearBridge Investments noted that while headline and core inflation were supported by easing shelter costs, underlying services inflation excluding housing accelerated sharply. He warned that rising demand-driven inflation could complicate decisions on additional rate cuts, given the Fed's dual mandate of controlling inflation and supporting employment.
Economists also highlighted the role of trade-related price pressures. Peter Cardillo of Spartan Capital Securities said tariff-related inflation appears to be moderating, even though it has not fully disappeared. He expects a rate cut around mid-year, provided inflation continues to move in the right direction and labour conditions do not tighten further.
Lindsay Rosner of Goldman Sachs Asset Management said the path toward monetary normalisation now looks clearer, with expectations of two rate cuts this year and the next move likely around June, subject to labour market trends.
Michael Metcalfe of State Street Markets added that the broader disinflation trend remains intact, reinforcing the view that peak inflation risks are behind the economy and opening the door for lower interest rates later in the year.
Source Reuters
5th Jun, 2025
25th May, 2023
11th May, 2023
27th Apr, 2023
Advertisement
Facebook
Whatsapp
