• U.S inflation levels dropped slightly in January, from 6.5% to 6.4%.
• However, the core CPI rose 0.4% over the month and 5.6% from the previous year, causing concern among investors that the U.S central bank will continue to raise the benchmark federal funds rate.
• Following the Labor Department’s CPI report, stocks, precious metals, and cryptocurrencies declined slightly but have since rebounded.
U.S Inflation Remains High
The U.S Consumer Price Index (CPI) measured the value of goods and services across the country in January 2023 and found that inflation levels dropped slightly from 6.5% to 6.4%. However, core CPI rose 0.4% over the month and 5.6% from the previous year, causing concern among investors that the U.S central bank will continue to raise interest rates in order to keep prices in check .
Investors Worry About Further Rate Hikes
At its last meeting, Federal Open Market Committee (FOMC) only raised interest rates by 0.25%, however Fed chair Jerome Powell warned that it is still early and there is no guarantee that inflation will go away quickly and painlessly as expected by analysts and economists . This has caused uncertainty in markets as investors worry about potential further rate hikes by federal reserve .
Financial Markets React
Following release of Labor Department’s Consumer Price Index report , stocks , precious metals , cryptocurrencies reacted by declining slightly before bouncing back again . As of 9:30 a Eastern time on Tuesday , all four US benchmark stock indexes are in positive territory while crypto economy is up 0:7 % today with gold per ounce increasing by 0:18 % according to New York Spot Price on Tuesday .
Long-term Effects Of High Inflation
High inflation can have long-term effects on an economy such as reducing economic growth , creating instability for businesses trying to plan ahead due to unpredictable market conditions & making it difficult for people living on fixed incomes who cannot keep up with rising prices which leads them into debt cycle or poverty .
Inflation remains higher than expected causing uncertainty in markets as investors worry about further rate hikes by federal reserve . Financial markets are reacting cautiously but stabilizing after initial decline following publication of consumer price index report while long-term effects of high inflation can be damaging for an economy if not controlled effectively & timely .