Analyst: The interest rate market believes that the risk of the Federal Reserve raising interest rates by 50 basis points next month is rising

It is reported that the inflation index favored by the Federal Reserve grew faster than expected in January, and the growth of consumer spending was the largest since 2021. These two factors put pressure on policy makers to continue to raise interest rates. Data released on Friday showed that the price index of personal consumption expenditure rose 0.6% from the previous month, the largest increase since last June. Excluding food and energy, the core price index also rose 0.6%. Personal expenditure adjusted for price changes increased by 1.1%, rebounding from the weakness at the end of last year.

Interpretation of this information:

The latest data shows that the inflation index that the Federal Reserve relies on increased more than anticipated, while consumer spending grew by the highest rate in several years. This presents a challenge for policy makers who must now decide whether to raise interest rates to combat inflation. Personal consumption expenditure rose by 0.6% in January, the highest increase seen since June 2021, and even excluding food and energy, it still grew by 0.6%. Meanwhile, personal expenditures adjusted for price changes rose by 1.1%, indicating a positive trend. The combination of rising inflation and healthy consumer spending puts pressure on policymakers to raise interest rates, although the economic recovery is still vulnerable to external factors such as the ongoing COVID-19 pandemic.

Overall, these metrics reveal a complex picture of the US economy in early 2022. While consumer spending is improving, inflation is also rising faster than expected, despite efforts by the Federal Reserve to contain it. This puts policy makers in a difficult position, as they must balance the need to combat inflation with the desire to support economic growth. It remains to be seen how this tension will be resolved in the coming months, but it is clear that both inflation and consumer spending will continue to be key issues for the US economy.