US Inflation Surges 3% in January: Increasing Pressure on Fed and Political Tensions

Amid the volatile global economy, the latest data shows that US inflation has surged to 3% in January, surpassing initial forecasts and raising concerns about monetary policy in the near future. Latest Economic Data The report from the US Bureau of Labor Statistics (BLS) (BLS) reveals that the average consumer price has increased by 0.5% compared to December. This not only marks a significant cyclical increase in inflation but also surprises compared to the expectations of economists, who had predicted inflation to remain stable at around 2.9%. In particular, core inflation - excluding volatile factors such as food and energy prices - has risen by 3.3% compared to the same period last year, indicating that inflationary pressures are spreading throughout the economy. The Reaction of Politicians and Central Banks Just after a few days, the situation becomes more complicated when President Donald Trump called for a rate cut to stimulate economic growth. Previously, under pressure from Trump, the Fed refused to cut interest rates and maintained the current policy rate from 4.25% to 4.5%. However, according to a recent post on Truth Social, Trump believes that lowering interest rates is necessary, along with the implementation of new tariffs: “Interest Rates should be lowered, something which would go hand in hand with upcoming Tariffs!!! Lets Rock and Roll, America!!!” Trump’s change of perspective highlights an increasingly tense political context, as senior economic officials face pressure from multiple sides. Statements by the Fed Chair and Other Officials Federal Reserve Chairman Jerome Powell quickly affirmed that the Fed will focus on its mission without being influenced by political factors. “We will do our job and avoid interference in politics,” Mr. Powell emphasized, demonstrating the independence of the Central Bank in the face of urgent demands from the political side. Meanwhile, Finance Minister Scott Bessent has also clarified that the government is currently focusing mainly on lowering the yields of 10-year bonds instead of adjusting short-term interest rates. This perspective reflects a multi-dimensional economic strategy, where managing market expectations and financial stability are given top priority. Impact on the Financial Market The financial market’s reaction is not waiting. Immediately after the unexpected announcement of the inflation rate increase, futures contracts tied to the Fed’s policy interest rate showed adjustments in investor expectations. According to these contracts, the market now does not predict any interest rate cuts until at least June or July. Some economists at Bank of America even believe that the Fed may not cut rates further this year, after having already reduced rates by a total of one percentage point in 2024. The negative impacts do not stop there. Major stock indices are also affected: the Dow Jones Industrial Average futures contract fell more than 400 points, while the S&P 500 and Nasdaq-100 indices dropped about 1%. Investors, who had bet on the possibility of an early interest rate cut, are forced to adjust their strategies in the context of the latest information from economic data. Conclusion The sharp rise in inflation in January is not just a statistic but also a warning signal of the dynamics in the US economy. Pressure from political sides, the Fed’s determination to maintain independence, and negative reactions from the financial markets have created a challenging picture. As monetary policy and economic strategies are readjusted in a new context, policymakers and investors alike need to prepare for a series of unpredictable fluctuations in the near future. DYOR! #Write2Earn #Write&Earn $BTC {spot}(BTCUSDT)