The latest data released by the US Department of Labor revealed that although inflation in the country continued to slow compared to previous months, it remained high.

Consequently, the US Consumer Price Index (CPI) increased 0.5 percent monthly in January, following a course in line with market expectations, while it increased 6.4 percent annually, above of expectations.

Annual inflation, which registered 9.1 percent in June 2022, its highest level since 1981, fell to its lowest level since October 2021.

The annual inflation data, which slowed less than expected in that period, echoed Fed Chairman Jerome Powell’s assessments that the process of reducing inflation to the Fed’s 2 percent target “will likely take some time” and that the disinflation process “is likely to be up and down.

Analysts said the latest inflation data will keep the Fed on track to continue raising rates.

‘FED ​​COMMITMENT STRENGTHENS’

American Enterprise Institute (AEI) senior specialist Steven Kamin said the CPI data was disappointing, saying inflation slowed slightly below analysts’ expectations on a year-over-year basis.

Noting that the CPI showed a strong monthly increase with the effect of rising energy prices, Kamin stressed that core inflation, which was stable at 0.4 percent a month, signaled some loss of disinflationary momentum.

Expressing that he believes the latest CPI report does not reveal enough new information for the Fed to raise the interest rate above expectations, Kamin said: “However, it is likely that the inflation data following the jobs report from A very strong January result in higher interest rates and a longer period of time strengthens the determination to keep the time up,” he said.

SUPER CORE INFLATION REMAINS STRONG

Moody’s Analytics chief economist Mark Zandi noted that inflation slowed on a yearly basis despite being high in January. he used the phrase.

Saying that what is promising about the data is that the cost of housing, which accounts for a third of the index and contributes significantly to inflation, will slow as rents come down, Zandi said that with the relaxation of the supply chain , the production of vehicles will increase and the prices of new cars will decrease soon.

Noting that the sore spot in the data is that “supercore” inflation, which can be defined as services other than energy and housing, remains strong, Zandi said: “The Fed focuses on this because it’s driven by the labour”. costs that can be affected by monetary policy. But wage growth should be subdued, and ultimately supercore inflation should be subdued as well.” he made the assessment of it.

THERE MAY BE A SIGNIFICANT SLOWDOWN IN THE SECOND HALF OF THE YEAR

Ryan Sweet, chief US economist at Oxford Economics, said the January CPI data reminded that there will be “ups and downs” in reaching the Fed’s 2 percent inflation target.

Reminding that the bank will not end monetary policy tightening until it is tight enough to reduce inflation, Sweet said that for this reason, an increase in employment of less than 100,000 a month and a nominal wage increase of 3.5 percent.

“The Fed is not giving the signal for two more 25 basis point rate hikes that subtly,” Sweet said. We will adjust the forecast taking into account the CPI for January and the employment report”. saying.

Noting that inflation may run a stronger than expected course in the first half of the year, Sweet said there could be a significant slowdown in the second half. (AA)