US inflation surprised markets with higher than expected reading. The annual inflation rate in the US slowed only slightly to 6.4% in January from 6.5% in December, less than market forecasts of 6.2% although some analysts expected even a reading of 5.8%YoY.
Core inflation eased for a fourth consecutive month to 5.6%YoY in January, the lowest since December 2021. Still, the rate came in above market expectations of 5.5%.
Inflation on an annual basis is falling, partially due to the base effect, whose impact should be stronger in the coming months. However, the monthly reading is very surprising, with increases of 0.5%MoM and 0.4%MoM for core inflation.
The real estate market is primarily responsible for the high inflation reading. Contribution of the shelter component continues to play a significant role. In the case of monthly inflation, shelter accounted for as much as half of the increase! Moreover, lower energy prices should have a positive impact in the short term, while lower car prices may also have limited impact on the overall reading in the upcoming months. This means that inflation may reached a local low, which reinforces bets that the Fed will stick to its hawkish rhetoric.
The real estate market still has a significant impact on the CPI reading. On an annual basis, the impact of fuel prices is negative, however the situation reverses when we look on a monthly basis. Source: Macrobond, XTB
A positive aspect is the decrease of core CPI ex- housing. The Fed itself has hinted that real estate services will continue to make a significant impact in the near future, however it expects that this trend may weaken later in the year. source: Bloomberg
Market response was very volatile, although fresh data supports the hawkish rhetoric of the Fed, which should ultimately strengthen the dollar and negatively affect Wall Street. Final impact of today's publication will be known later in the session - for now, markets are still very volatile.
US100 is highly volatile and erases early gains. Local support around 12,500 points is currently being tested. Break below may offset the recovery move which started at the beginning of the week. Source: xStation5
3 markets to watch next week - (17.10.2025)
US100 tries to recover🗽Sell-off hits uranium stocks
DE40: European markets decline due to concerns about the U.S. banking sector
Cockroach fears cause stock market sell off, as we wait for clearer details
This content has been created by XTB S.A. This service is provided by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, entered in the register of entrepreneurs of the National Court Register (Krajowy Rejestr Sądowy) conducted by District Court for the Capital City of Warsaw, XII Commercial Division of the National Court Register under KRS number 0000217580, REGON number 015803782 and Tax Identification Number (NIP) 527-24-43-955, with the fully paid up share capital in the amount of PLN 5.869.181,75. XTB S.A. conducts brokerage activities on the basis of the license granted by Polish Securities and Exchange Commission on 8th November 2005 No. DDM-M-4021-57-1/2005 and is supervised by Polish Supervision Authority.
