The Feds chose a less aggressive stance and dialed down rate hikes to 0.25 percentage points. This revived investor optimism. However, inflation reaccelerated in January, as the Consumer Price Index (CPI) rose 0.5% in January, translating to a 6.4% annual gain. This higher-than-expected inflation shows that the Fed might have to keep its tight monetary policy in place.
Fed Chair Jerome Powell, reflecting the central bank’s commitment to the 2% inflation target, commented, “We have more work to do. We’re going to be cautious about declaring victory and sending signals that we think the game is won.” Persistent rate hikes could tip the economy into a recession.
