Analysis: Stable Labor Market May Keep Fed on Hold

On Friday, February 13, the U.S. Bureau of Labor Statistics (BLS) released January’s inflation data: - The Consumer Price Index (CPI) rose 0.2% month-over-month, down from December’s 0.3% gain and below economists’ 0.3% forecast. - Core CPI (excluding volatile food and energy costs) climbed 0.3% month-over-month, edging up from December’s 0.2% rise. Year-over-year: - CPI increased 2.4%, slowing from December’s 2.7% (largely due to a higher base effect). - Core CPI was up 2.5% YoY, down from December’s 2.6%. January’s report marked the first time it included an updated seasonal adjustment factor reflecting 2025 price changes. Economists noted core CPI often beats January forecasts annually, as the Labor Department’s model doesn’t fully account for one-time early-year price hikes. This month’s gains likely reflect both the early-year effect and pass-through from Trump’s broad tariffs. While inflation slowed, labor market stability could prompt the Federal Reserve to hold interest rates steady for a stretch. Economists project inflation may temporarily rebound this year, driven by tariff pass-through and last year’s U.S. dollar depreciation. (Jin10)