Intant View: US consumer prices rise less than expected in January

NEW YORK, Feb 13 (Reuters) – U.S. consumer prices increased less than expected in January, data showed, keeping the Federal Reserve on track to cut interest rates this year.

The Consumer Price Index rose 0.2% last month after an unrevised 0.3% gain in December. It rose 2.4% on a yearly basis, less than the estimate of a 2.5% increase, according to economists polled by Reuters.

The report was slightly delayed by last week’s three-day shutdown of the federal government.

MARKET REACTION:  

STOCKS: U.S. stock futures were last up on the day after the inflation data.

BONDS: U.S. Treasury yields slipped after the inflation report. The  benchmark U.S. 10-year notes was last down 1.9 bps at 4.085%at 4.19%.

FOREX: The dollar index was slightly down at 96.906.

COMMENTS:

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK:

“The bottom line is, this is a good number. It suggests that we’re still away from the Fed target of 2%, but inflation is not accelerating and perhaps maybe we’re beginning to see some daylight in terms of the tariff inflationary aspect of it. It’s still evident, but it’s moderating.”

“I’m expecting (a rate cut) sometime in June, but a lot depends on the labor market. But if the inflation number continues the way it is going, in the right direction, then I think as soon as the new Chairman of the Federal Reserve takes over, we can expect a rate cut.”

LINDSAY ROSNER, HEAD OF MULTI SECTOR FIXED INCOME INVESTING, GOLDMAN SACHS ASSET MANAGEMENT, NEW YORK: (via email)”Trust the Groundhog. The Fed’s path to ‘normalization’ cuts appears clearer now with fears of a strong January print behind us with CPI coming in cold! How short or long that path is however will depend on whether employment continues to show signs of improvement, given the FOMC’s sensitivity to labor market weakness. We continue to expect two cuts this year, with the next move coming in June.”

MICHAEL METCALFE, HEAD OF MACRO STRATEGY, STATE STREET MARKETS, LONDON:

“The important takeaway for both rate markets and equities is that the trend in disinflation continues. It kind of reinforces the idea that we are past peak inflation concerns. This is painting a picture of a continued improving inflation outlook, which will allow for rates to fall later in the year.”

(Compiled by the Global Finance & Markets Breaking News)