Finance

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

Published

1 week 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

Steve Cohen says tariffs and DOGE’s cuts are negative for economy, market correction could be soon

Published

13 hours ago

February 21, 2025

Business Finance News

Steve Cohen, chairman and CEO of Point72, speaking to CNBC on April 3, 2024.

CNBC

Billionaire investor Steve Cohen doubled down on his negative view of the U.S. economy due to a backdrop of punitive tariffs, immigration crackdown and federal spending cuts spearheaded by the Department of Government Efficiency.

The chairman and CEO of hedge fund Point72 said he turned bearish for the first time in a while after President Donald Trump’s aggressive trade policy made him worry about inflationary pressures and lower consumer spending. Meanwhile, his tough stance on immigration could mean a constrained supply of labor, he said.

“Tariffs cannot be positive, okay? I mean, it’s a tax,” Cohen said Friday at the FII Priority Summit in Miami Beach, Fla. “On top of that, we have slowing immigration, which means the labor force will not grow as rapidly as … the last five years and so.”

The prominent hedge fund investor took a stab at DOGE’s cost-cutting moves led by Elon Musk, saying they could only hurt the economy more. Musk has said his goal is to cut federal spending by $2 trillion.

“When that money has been coursing through the economy over many years, and now, potentially it will be reduced or stopped in many ways, has got to be negative for the economy,” Cohen said.

Cohen believes a pullback in the stock market could be likely given the uncertain macroeconomic environment. He sees the U.S. economy growth to slow down to 1.5% from 2.5% in the second half of the year.

“I think we’re seeing the regime shift a little bit. It may only last a year or so, but it’s definitely a period where I think the best gains have been had and wouldn’t surprise me to see a significant correction,” Cohen said. “I don’t think it’s going to be a disaster.”