Announced this morning, the Consumer Price Index increased 0.6% in January and 7.5% on an annual basis, more than expected. Monthly prices for Fuel Oil, up 9.5%, and Electricity, up 4.2%, were strong while prices for Gasoline were weak. The core rate, which excludes prices for food and energy, increased 0.6% in January and 6.0% on an annual basis, also more than expected. Meanwhile, Initial Jobless Claims were 223,000 for the week ending February 5th, a bit less than the previous week. Overall, inflation measures remain hot, at levels not seen since the early 1980’s, and labor market measures are firm. The confluence of supply chain problems, fiscal support, consumer spending moving toward goods rather than services, and an accommodative Federal Reserve have all contributed to higher price levels over the past year. It is expected that these items should normalize, but the speed that these pressures abate will be key for the Federal Reserve as they proceed with rate increases and balance sheet adjustments in the months ahead. In all, the 10-year U.S. treasury yield ticks markedly higher following the report, nearing 2%, and equity futures are lower as we head into the market open.
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