Futures sink as strong inflation data raises rate hike fears


JPMorgan economist Michael Feroli called that increase in the core CPI "scorching" and said it raised the likelihood that Fed policymakers might revise their rate hike guidance at their March meeting to four rate hikes for 2018 from three.

The CPI increased 0.5 percent in January on a seasonally adjusted basis, the Department of Labor reported Wednesday.

Inflation's consistent overshooting of the Bank of England's government mandated 2% target over the past year or so is one of the main drivers for the bank's recent assertions that it will likely raise interest rates faster, and to a greater extent than previously expected during 2018.

Inflation figures for a big economic data point came out higher than anticipated Wednesday morning, causing stock futures to run in the negative before the opening bell. The rate was expected to fall moderately to 3 percent.

The NBS report stated that the urban inflation rate dropped to 15.56 per cent year-on-year in January 2018 from 16.78 per cent recorded in December 2017, while the rural inflation rate also eased to 14.76 per cent in January from 15.02 per cent in December 2017.

The recently announced fiscal stimulus package comes at a time where the labour market is already very tight, which coupled with a weaker dollar, could lead to higher levels of inflation in the future. Core prices had been expected to increase by 0.2%.

Investors took the Core Consumer Price Index's year-over-year jump of 1.8% in January, compared to the expected 1.7%, as a sign that higher inflation is in the works. It grew by 8.4 per cent during the month as compared to just 0.6 per cent in December 2016.

"Since the last payrolls about two weeks ago, inflation is the obsession of traders", Pierre Martin, a trader at Saxo Bank in Zurich, said by phone.

The Federal Reserve were hoping the inflation rate stayed above 2.0% and in the last few months that has been the case.

Britain's annual inflation rate remained at 3.0 per cent in January, holding near to a six-year peak, official data showed yesterday.

Investors have been pricing in a good chance that rates would rise in May, with a second rise later this year, probably in November.

The Retail Prices Index (RPI), a separate measure of inflation, edged lower to 4.0% last month from 4.1% in December.

The highest increases were recorded in prices of fuel and lubricants for personal transport and transport equipment, vehicle spare parts, accommodation services, maintenance and fix of personal transport equipment, appliances articles and products for personal care.