What deeply disappointed was “Core” CPI rose +0.4%, highest since May. This measure of inflation remained at 3.9% over the last 12 months, the same as it was in December.
The 0.5% month-on-month increase in January's core producer price index is likely to feed into a higher January reading for the Fed's preferred measure for inflation due out at the end of this month, economists said, and keep the Fed on hold for longer. Analysts at Citi calculated the core personal consumption expenditures price index will re-accelerate to 2.4% on a six-month basis, from a previous 1.9%, and called it a "troubling" development. "We continue to expect the first Fed cut in June - and higher for longer rates keep the probability of recession elevated," they wrote.