13
February 2025
US inflation rises to 3% in January 2025, fueling concerns over stalled progress
Adriaan Pask
Chief Investment Officer, PSG Wealth
Event
The annual inflation rate in the US rose to 3% in January 2025, up from 2.90% in December 2024, surpassing
market expectations of 2.90%. This suggests that progress in controlling inflation has stalled.
• According to Trading Economics, energy costs rose by 1% year-on-year in January 2025, marking the first
increase in six months, following a 0.50% decline in December. This rise was primarily driven by gasoline (-
0.20% vs -3.40%), fuel oil (-5.30% vs -13.10%), and natural gas (4.90% vs 4.90%).
• On a monthly basis, the CPI rose by 0.50%, up from 0.40% in the previous month and above expectations of a 0.30% increase.
• Meanwhile, core inflation climbed up to 3.30% annually, from 3.20% in the prior month and surpassed market expectations of 3.10%.
The Impact
• Stocks in the US fell on Wednesday, with all three major indices dropping by nearly 1% following the release of the CPI data. Every sector ended in the red, with real estate, utilities, industrials, and materials experiencing the steepest losses.
• The 5-year US Treasury yield rose to 4.48%, while the yields for the 10-year and 30-year notes came in at 4.65% and 4.85%, respectively.
• The FTSE/JSE All Share Index (ALSI) was in the green at 0.48% on Wednesday afternoon as traders digested the new economic data from the US.
• The rand was trading at R18.53/$ at 16h58 on Wednesday afternoon.
The Assessment
- Inflation remains a challenge for the US economy. This could potentially lead to further tightening by the Federal Reserve, as policymakers seek to curb inflationary expectations while balancing growth.
- Our fund solutions remain focused on actively managed strategies, leveraging what we believe to be the best portfolio management talent both locally and internationally. This expertise enables our portfolios to perform effectively, even amidst ongoing uncertainty regarding the outlook for inflation.
- The next US CPI data will be released on Wednesday, 12 March 2025.