Inflation continued its pandemic-era rise, pushing stocks south today. The Consumer Price Index (CPI) for January 2021 rose 0.6%. The CPI comes to 7.5% YoY, the fastest since 1982.
Fuel oil was the fastest-growing product in the CPI-U, up 9.5% in the month of January. Electricity prices were also up 4.2% in the month. Most energy products have seen unfettered amounts of inflation during the pandemic, due in-part because of robust pricing on petroleum and natural gas commodities. 📈
Used cars continued their inflation-era rise, now up more than 40% YoY. Most other goods such as food, medical care, apparel, and shelter are far below those figures, closer to 0% than to 40%. That’s how the sky-high energy inflation costs balance out with all other items. You can get into the nitty gritty on the BLS website. ⚡
The news sent treasury yields rising, and the Fed’s nerves rose with them. 😡 The Fed is faced with a decision regarding its first rate raise in March. The Federal Reserve is debating the expected 0.25% increase or a more aggressive hike.
A bigger hike is looking like the more probable option — at least in the eyes of investors. The markets priced a 100% probability of a 50bp (0.5%) hike in March. The President of the Federal Reserve Bank of St. Louis also indicated that he would support raising rates by a full percentage point by July. As it stands, the Fed Funds Rate is currently set from 0-0.25% — so that might not be hard to do.