Inflation Runs Hot In January: 'Houston, We Have A Problem,' Experts Warn

January's inflation data came in hotter-than-expected Wednesday morning, with the Consumer Price Index rising to 3% year-over-year. Experts are reacting to the surprise print and what it could mean for the future path of interest rates.

What To Know: Monthly inflation climbed at its highest rate since August 2023, driven by increases in food and energy prices. However, core inflation excluding food and energy prices, also moved higher which could indicate broader concerns.

Expert Ideas: Charlie Ripley, senior investment strategist for Allianz Investment Management, cautioned that potential price increases resulting from President Donald Trump's tariffs have not yet been calculated and the market should reconsider its hopes for rate cuts in 2025.

"Overall, today’s inflation data should force market participants to re-think the Fed’s ability to cut rates this year, especially considering the rise in prices is likely unrelated to any tariff activity from the White House, Ripley said.

Chris Zaccarelli, chief investment officer for Northlight Asset Management, noted that year-over-year inflation landed right at 3%, taking rate cuts off the table for this year.

"Houston we have a problem. This morning's Consumer Price Index (CPI) report is a big problem for the Fed. Not only did all metrics jump higher, but we are squarely in the 3's on the year-over-year numbers," Zaccarelli said.

Peter Schiff went even further, calling for a drastic inter-meeting 200 basis point rate hike and saying that the Federal Reserve has been "way too loose" in its policies.

Jan. CPI rose 3% YoY. But prices spiked 0.5% on the month, an annualized inflation rate of 6.2%. Core CPI also jumped 0.4% in Jan. rising 3.3% YoY. As I've been warning, the Fed is way too loose. At a minimum, the Fed needs to do an inter-meeting 200 basis point rate hike today.
— Peter Schiff (@PeterSchiff) February 12, 2025

Markets React: All major U.S. indices are down with the SPDR S&P 500 ETF Trust SPY, tracking the S&P 500, down 0.37% at $603.07 and the Invesco QQQ Trust QQQ, tracking the Nasdaq 100 index, down 0.18% at $527.02 at the time of publication Wednesday.

Read Next: