US inflation - above expectations

US inflation accelerated in January 2025, for the fourth month in a row, reaching 3% at an annual rate, while analysts expected a slowdown, AFP reports.

According to data on the CPI index, published yesterday by the US Department of Labor, consumer prices in the US rose by 3% between January 2024 and January 2025, after an advance of 2.9% at an annual rate in December.

Analysts interviewed by MarketWatch expected a slowdown in the CPI index to 2.8% at an annual rate, in January, notes Agerpres. Analysts also expected a slowdown in core inflation, that is, what remains after the prices of volatile goods, such as energy and food, are eliminated. However, data released yesterday by the US Department of Labor shows that it has increased, up to 3.3% at an annual rate.

From one month to the next, the prices that recorded the largest increases were those for auto insurance, used vehicles, entertainment activities, medical care, airline tickets and communications.

Such a level of inflation could give new arguments to the US central bank (Fed), which does not want to rush to reduce the reference interest rate, especially considering the absence of signs of weakness in the labor market or a slowdown in consumption.

However, in guiding its monetary policy, the Fed follows another indicator of inflation, the PCE index, which is published at the end of the month, and which in December rose to 2.6% at an annual rate. The Fed's objective is to bring inflation to 2%.

Independent of political power, the Federal Reserve (Fed) is under pressure from President Donald Trump to cut interest rates. "Interest rates must go down," Donald Trump said yesterday on his Truth Social network account, just before the publication of the CPI data.

Recall that the United States economy grew by 2.3% in the last quarter of 2024, at an annualized rate adjusted for inflation, according to a report by the Department of Commerce. The result is below the estimates of Dow Jones analysts, who anticipated an advance of 2.5%, and marks a slowdown compared to the 3.1% growth recorded in the previous quarter, according to CNBC.

For the whole year, US GDP grew by 2.8%, compared to 2.9% in 2023. The annualized growth from the last quarter of 2023 to the fourth quarter of 2024 was 2.5%.

Economic growth was largely driven by consumption, which grew at a solid pace of 4.2%, accounting for about two-thirds of total economic activity as usual. Government spending also contributed to the expansion, rising 3.2%.

On the other hand, trade was a negative factor in the economic growth equation. Imports fell by 0.8%, as did exports. Gross private domestic investment fell by 5.6%, cutting more than a percentage point from GDP.