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Inflation Is Running Hot, Putting Pressure On The Fed To Raise Rates

Wednesday, February 15, 2017 11:49
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U.S. inflation surged in January, rising the most in four years, which will no doubt put additional pressure on the Federal Reserve to follow through with multiple interest rate hikes this year.

The benchmark CPI index, which is the most popular gauge of domestic inflation rose an unexpectedly high amount, according to just-released data. From Bloomberg:

The consumer-price index rose a larger-than-forecast 0.6 percent after a 0.3 percent gain in December, Labor Department figures showed Wednesday. Compared with the same month last year, costs paid by Americans for goods and services rose 2.5 percent, the most since March 2012.

Higher gasoline, apparel, and new car prices led the gains. Gasoline accounted for about half of the increase in January CPI.

Fed chairperson Janet Yellen did her best yesterday to prepare the markets for impending rate hikes during her testimony in from of the Senate Banking Committee yesterday. Her message was seen as mostly hawkish (rates rising) by the majority of analysts.

The bond markets continued to sell off on Wednesday amid the news. The iShares Barclays 20+ Year Treasury Bond ETF (NASDAQ:TLT) was trading at $118.83 per share on Wednesday afternoon, down $0.68 (-0.57%). Year-to-date, TLT has declined -0.25%, versus a 4.86% rise in the benchmark S&P 500 index during the same period.

TLT currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #20 of 27 ETFs in the Government Bonds ETFs category.

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