US inflation tops forecasts, dimming chances for Federal Reserve rate cuts

There is no getting away from the fact that this is a hot report and with the sense that potential tariffs run upside risk for inflation the market is understandably of the view the Federal Reserve is going to find it challenging to justify rate cuts in the near future,

said James Knightley, chief international economist at ING

The Fed will see January's hot inflation print as confirmation that price pressures continue to bubble beneath the economy's surface,

Bill Adams, chief economist at Comerica, wrote in commentary that echoed others around Wall Street

There's a déjà vu element here — 2024 also started with a few hot inflation prints that forced a big reassessment of rate-cutting expectations,

What they're saying ... JPMorgan Wealth Management's Elyse Ausenbaugh wrote in a note

No matter how you slice the data, the January [Consumer Price Index] print marks an unwelcome re-acceleration in prices to start off 2025,

Jason Pride, chief of investment strategy and research at Glenmede, wrote Wednesday morning

The egg shock is enormous,

said Joe Seydl, senior markets economist at J.P. Morgan Private Bank

Mark Zandichief economist

It feels like everything that could go wrong in this report did go wrong,

said Mark Zandi, chief economist at Moody's

Paul Ashworthcapital Economics chief North America economist

Inflation has now been around these rates for some time and clearly isn't coming down decisively any more,

Paul Ashworth, chief North America economist at Capital Economics, wrote in a note Wednesday

Jerome Powellfed Chair

In some cases, it doesn't reach the consumer much, and in some cases it does,

Powell said

Greg DacoeY chief economist

Overall, this is not a great read,

EY chief economist Gregory Daco told AFP

Greg DacoeY chief economist

Any administration is always going to be looking for lower interest rates, as they tend to be growth stimulative,

Daco told AFP

The paradox is that the policies that are being promoted by the administration tend to have an inflationary lean, and therefore would favor the Fed maintaining a higher-for-longer stance, which goes very much in the opposite direction of this desire for lower rates,

he added

Jerome Powellfed Chair

With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance. We know that reducing policy restraint too fast or too much could hinder progress on inflation,

Powell said in his prepared remarks

We're in a pretty good place with this economy. We want to make more progress on inflation and we think our policy rate is in a good place, and we don't see any reason to be in a hurry to reduce it further,

Federal Reserve Chair Powell said regarding potential interest rate cuts during his testimony before the Senate on Tuesday

Donald Trumppresident

Look, they got [prices] up. I'd like to bring them down. It's hard to bring things down once they're up. You know, it's very hard. But I think that they will. I think that energy is going to bring them down. I think a better supply chain is going to bring them down."

In his Time magazine interview in late December, President Trump said

Jerome Powellfed Chair

We do not need to be in a hurry,

Powell told the Senate Banking Committee in a hearing on Tuesday

Today's stronger than expected CPI release is likely to further cement the FOMC's cautious approach to easing,

Whitney Watson, global co-head and co-chief investment officer of fixed income and liquidity solutions within Goldman Sachs Asset Management, said in a statement

Many provinces and cities have lowered their CPI expectation targets from around 3 percent to 2 percent. This change should not be interpreted as a reduced policy focus on inflation, but rather a significant shift in the management target of inflation."

Zhang Jun, chief economist of CGS International, said

Markets are not convinced that we will see disinflation later in the year, and today’s data certainly don’t give evidence of that,

said Eric Winograd, chief economist at AllianceBernstein

Li Chao (chess player)chinese chess player

Inflation is in an early stage of bottoming out and recovering,

said Li Chao, chief economist at Zheshang Securities

Li Chao (chess player)chinese chess player

With the Central Economic Work Conference having called for a reasonable recovery in overall price levels, there is still room for monetary policy easing, including reserve requirement ratio cuts and interest rate reductions,

Li said