Finance

January inflation gives Fed more reason to hold on interest rate cuts

Published

3 months ago

February 13, 2025

Business Finance News

Egg prices soared by more than 15% in January. (iStock)

Annual inflation increased to 3% in January, rising above expectations and giving the Federal Reserve further reason to slow down interest rate cuts.

Inflation increased 0.5% monthly, slightly exceeding expectations and above the previous month’s increase of 0.4%, according to the Consumer Price Index (CPI) released by the Bureau of Labor Statistics (BLS). Core CPI, which excludes food and energy, rose by 0.4% in January, coming in at the same level as December’s increase. This brought the year-over-year rate to 3.3%.

Shelter costs rose 0.4% and were the most significant contributor to the monthly increase in January, accounting for nearly 30% of the monthly increase in all items. Gas was up 1.8% over the month. Food prices continued to rise, increasing 0.4% last month. The food at home index rose 0.5%, driven primarily by the soaring costs of eggs, which increased 15.2% in January.

“The unexpected acceleration in inflation marks the third consecutive monthly uptick in the consumer price index and extends a reflationary trend since two consecutive flat months for the index in May and June 2024,” Jim Baird, Plante Moran Financial Advisors’ chief investment officer, said in a statement. “Against a backdrop of solid demand, inflation has accelerated. It’s a reality that may spook consumers who remember the Covid-19 era price spike all too well.

“It will also make President Trump’s proposed import tariffs a tougher sell than was the case during his first term, when both inflation and interest rates were exceptionally low,” Baird continued.

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The Fed pauses on further rate cuts

The increase in inflation, combined with a stable jobs market and economic growth, has given the Federal Reserve more room to work.

The Federal Reserve held interest rates at 4.5% to 4.75% in January, prompted by strong economic indicators that gave the central bank more room to wait. Federal Reserve Chair Jerome Powell said that the central bank intend to remain cautious about additional rate cuts so long as the job market remains solid and prices continue to climb.

“The murkiness of evolving trade policy creates a significant unknown for Fed policymakers who will have to grapple with the potential conflicting policy challenges of slower real growth and higher inflation,” Baird said. “While even bearish forecasts are a far cry from the stagflationary environment of the 1970s, the playbook would seemingly still apply.

“Arresting inflation is likely to remain the priority for the Fed, even at the expense of near-term growth,” Baird said. “The fear of inflation expectations becoming unanchored is just too much for policymakers to ignore.”

You can take out a personal loan before future rate hikes to help pay down high-interest debt. Visit Credible to find your personal loan rate without affecting your credit score.

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How higher for longer impacts your wallet

All signs point to the Fed holding interest rates higher for longer, which means consumers will continue to be impacted by stubbornly elevated interest rates impacting a range of credit products, including credit cards, mortgages, unsecured personal loans and auto loans, according to Charlie Wise, TransUnion’s senior vice president of research and consulting.

“Consumers should avoid building and carrying large credit card balances, particularly in light of very high interest rates on this type of debt, and whenever possible pay more than the monthly minimums due on their cards,” Wise said in a statement.

Additionally, Wise advised that consumers keep a close watch on their credit profiles and keep them in the best shape possible so that when rates finally drop to a more manageable level, they are ready to refinance their existing debts into more affordable loans.

Using a personal loan to pay off high-interest debt at a lower rate could help you reduce your expenses and put money back in your wallet. You can visit Credible to find your personalized interest rate today.

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Finance

China’s Xiaomi claims new phone chip rivals Apple at a cheaper price

Published

31 minutes ago

May 22, 2025

Business Finance News

Chinese smartphone company Xiaomi is developing its own chip called Xring O1.

Cfoto | Future Publishing | Getty Images

BEIJING — Chinese smartphone company Xiaomi is taking on Apple’s iPhone with an advanced chip and a cheaper phone.

Xiaomi is winning the battle on the pricing of its latest phone. The new Xiaomi 15S Pro starts at 5,499 yuan ($764) — making it eligible for a state-subsidized discount — and is significantly cheaper than Apple models containing the company’s most advanced phone chip. The iPhone 16 Pro starts at 7,999 yuan, while the iPhone Pro Max model begins at 9,999 yuan — above the 6,000 yuan cut-off for a Chinese government discount for consumers.

And Xiaomi CEO Lei Jun claims his company also has a competitive chip, saying at a launch event on Thursday that Xiaomi’s new Xring O1 beat Apple’s A18 Pro on several technical metrics, including the ability to operate a game with less heat.

CNBC has not independently verified these claims. CNBC has reached out to Apple for comment.

“Apple is still number one,” Lei said in Mandarin, according to a CNBC translation. He said the Xring O1’s performance should not be seen as an attempt to pressure Apple, but rather as an indicator of the great effort Xiaomi made to develop a comparable processor.

The U.S. has increasingly restricted China’s ability to access high-end equipment for developing advanced semiconductors used in training artificial intelligence models.

Lei did not discuss any significant AI features for the 15S Pro, but showed how it could be used to lock and unlock a compatible car.

He announced that Xiaomi will spend 200 billion yuan on research and development in the next five years, starting from 2026, and predicted 30% revenue growth this year.

Lei had teased the 3 nanometer chip last week on Chinese social media app Weibo. He later noted the chip is in mass production and said the company would invest at least 50 billion yuan ($6.9 billion) over the next 10 years in its own chip development.

Apple’s iPhone 16 Pro and Pro Max use A18 Pro chips built on the same 3 nanometer process.
Around 40% of Xiaomi’s phones currently use chips by Qualcomm and MediaTek, according to Counterpoint Research Partner Niel Shah.

Xiaomi spent 13.5 billion ($1.87 billion) over four years to develop the Xring O1, Lei said in a social media post. He revealed that the company started developing chips in 2014 and unveiled one in 2017, before temporarily suspending such research.

Last spring, Xiaomi launched its first electric car, the SU7 sedan, with a price $4,000 below that of Tesla’s Model 3 at the time. Ford CEO Jim Farley said he spent months driving a Xiaomi electric car, as he tried to assess competition from Chinese automakers.

Xiaomi’s first SUV, called the YU7, will be officially released in July, Lei said in a social media post, noting the car’s price wouldn’t be revealed Thursday. Lei did share some promotional images and car features at the event.

The company delivered more than 28,000 vehicles in April, down from its record of more than 29,000 during the previous month. That comes after the crash of an SU7 vehicle in China, which left three people dead. China has since required automakers to use more conservative language when advertising driver-assist systems.

Xiaomi is set to release its first-quarter results on May 27, after the company in March reported record revenue and net profit for 2024. Sales generated from overseas markets last year accounted for nearly 42% of total revenue.

The company’s shares remain more than 50% higher year-to-date.

— CNBC’s Arjun Kharpal and Bernice Ooi contributed to this report.