2025’s first inflation print shows New Year’s bump

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The first CPI reading of the year came out this morning, showing that inflation picked up for the fourth-straight month in January. The headline figure is up 3% over the year, slightly above what analysts had predicted.

Month over month, prices across the board are up 0.5%, the biggest month increase since August 2023. The core index, which excludes food and energy prices, is up 0.4% from December.

The January CPI report is always especially important as it reflects turn-of-the-year price changes. The first month of the year historically brings bigger price increases.

Shelter costs accounted for almost 30% of the total CPI increase, although some of this increase can be attributed to wildfires in California. Food prices also brought up the headline figure.

The index for food was up 0.4% in January, with meats, poultry, fish and eggs alone gaining 1.9% from December.

Stocks initially fell on the news but pared losses later in the session. 10-year Treasury yields — a proxy for loans and mortgages — jumped above 4.65%. Odds of a March rate cut went from 5% to 2.5% following the report’s release, according to data from CME Group.

These inflation figures, while perhaps initially alarming, are not too far off from expectations. Plus, first quarter inflation almost always shows a new year’s bump. Add in the devastating fires in the Los Angeles area and it’s a bit of a perfect storm. We’ll see if the market agrees tomorrow.

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