Focus on US CPI Inflation Report And New Tariffs
This week lacks interest rate decisions by major banks but there are still financial data releases that could shape financial markets in the next few days. The US CPI inflation report, the UK GDP survey and the US retail sales data are among them.
US President Donald Trump said that new 25% tariffs on all steel and aluminum imports into the US would take effect “almost immediately.”
Gold hit a new record high, reaching $2,900 per ounce as trade war fears led investors to buy the so-called safe haven assets. Gold prices are now up by 9% year-to-date.
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US CPI January 2025 Report
On Wednesday, the US Department of Labour Statistics will release the US CPI inflation report for the month of January. Economists expect headline inflation to remain stable at 2.9% on an annualised basis while they suggest that monthly inflation could drop to 0.3% from 0.4% recorded in December.
The Federal Reserve (Fed) target is to bring inflation down to 2.0%, nevertheless that has proven to be a difficult task as the US economy fires on all cylinders. The US central bank was forecast to lower interest rates even more but now it seems that the Federal Open Market Committee could pause the unwinding of its monetary policy, especially with the effect of trade wars and tariffs being unknown.
A report published by ING market analysts on February 7th said: “Stickier inflation numbers and tariff threats have prematurely put the brakes on the Fed's ambitions to get interest rates back to neutral. US inflation will make early headlines, with the risk that we see 0.3% month-on-month prints for both headline and core measures. While Trump has pulled back on tariffs in recent days, there is still a sense that we are likely to see the introduced in the second quarter once the Commerce departments report back on trade practices employed by foreign governments. This suggests inflation is likely to remain elevated and that the Fed is unlikely to cut rates before June.”
UK GDP Q4 2024 Report
On Thursday morning, it will be the Office for National Statistics (ONS) turn to release the UK GDP report for the fourth quarter of 2024. Economists forecast that the UK economy expanded by 1.1% on an annualised basis while they expect a –0.1% figure on a monthly basis.
The Confederation of British Industry (CBI) projects that “UK GDP will have grown by 0.9% in 2024. Looking ahead, economic activity will increase at a steady, but unimpressive, pace of 1.6% in 2025 and 1.5% in 2026.
The House of Commons mentioned in a report that weak GDP growth is expected to continue into the first months of 2025, amongst weak business confidence. In its report, it is noted that “GDP was flat in the second half of 2024, and business surveys indicate that economic activity has been weak in early 2025. Firms have expressed concerns over upcoming tax rises, with some saying they will reduce employment and raise prices as a result.”
US Retail Sales January 2025 Report
The US retail sales set of data for the first month of the year will be the last interesting report due on Friday. Retail sales reports are widely followed by investors and traders as an indicator of consumer spending, which is one of the major drivers of the US economy.
Economists expect retail sales to come in at –0.1% on a month-to-month basis while core retail sales could come in at 0.3%, lower than December’s 0.4% reading.
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