Inflation Spikes, Cut in Jeopardy

Core inflation bounded ahead of expectations in January, which is bad news for anyone betting on a big rate cut from the Fed–and for the Fed itself. The consumer price index rose 0.4%, with core CPI rising 0.3%, putting the year-over-year figures at 4.3% and 2.5% respectively, well above the Fed’s traditional 1.5%-2% comfort zone, the Wall Street Journal reports.

Investors have been expecting a half-point rate cut next month, on top of the 225 basis points slashed since September, but this data will force investors to reconsider, and certainly dashes any hopes of a bigger move. In another report, housing starts rose in January, for the first time since October, but the numbers were still lower than analyst predictions. (More US economy stories.)