Your Economy (No Politics)

[Bullwinkle]

U.S. CPI grows 0.7% in January
Wednesday, February 22, 2006 3:57:25 PM
http://www.FXstreet.com


FXstreet.com (Barcelona) - The big surprise of the U.S. consumer price index (CPI) report released today was the jump up in the headline inflation rate. Economists expected a 0.5% rise in January, but energy costs hit inflation hard, driving the headline figure up 0.7%.This was the fastest pace in four months as the cost of gasoline and electricity posted big gains Growth should slow towards potential while inflation should remain under control. ''If there were an inflation target for the core, it would likely be around 2%, which is about where it is at right now,'' stated Jason Schenker, economist at Wachovia Corporation. ''We are calling for two more 25 bp rate hikes in the Federal Funds Rate – one in March and another in May,'' he said.

Over the last 12 months core CPI, that is the CPI without counting with energies and food, was up 2.1%, down from the 2.2% gain seen on December. ''If it remains this close to 2%, then I think economically speaking, we're sitting pretty,'' continued Mr. Schenker. ''I don't think this changes what the Fed does in May. I think another rate hike is likely then. But I think it stems the talk of rates rising as high as 5.25%, at least for now,'' he concluded.

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