U.S. inflation was fairly mild at the start of the year, defying concerns for a bigger jump and boosting expectations that the Federal Reserve will deliver more interest-rate cuts.
The consumer price index rose 0.2% in January, the smallest gain since July and restrained by lower energy costs, according to Bureau of Labor Statistics data out Friday. An underlying metric known as the core CPI, which excludes food and energy, advanced as expected from a month earlier. January inflation readings have been strong in recent years, often beating expectations as companies tend to raise their prices at the start of the year. Many economists had called for an even bigger pickup in the core CPI for that reason, as well as predictions that firms would pass along more tariff-related costs to consumers.
Wall Street steadies after its AI-induced sell-off
U.S. stocks steadied after an encouraging update on inflation helped calm a Wall Street that’s been wracked by worries about how AI may upend the business world. The S&P 500 barely budged on Friday, a day after it had tumbled to one of its worst losses since Thanksgiving. The Dow Jones Industrial Average rose 0.1%, and the Nasdaq composite fell 0.2%. Stocks got some help from easing Treasury yields, which fell after a report showed inflation slowed last month. Several stocks that got hit by worries about AI also recovered some of their sharp losses.
Besides helping U.S. households struggling to keep up with the cost of living, slower inflation could also give the Federal Reserve more leeway to cut interest rates. Reducing rates would give the economy a boost and juice prices for stocks. What holds the Fed back from cuts is that they can give inflation more fuel.