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US inflation unexpectedly increased to 3 per cent in January, bolstering the case for the Federal Reserve to proceed slowly with interest rate cuts and hitting stocks and government bonds.
Wednesday’s figure from the Bureau of Labor Statistics surpassed the expectations of economists polled by Reuters, who predicted that inflation would hold steady at December’s 2.9 per cent.
The month-on-month increase for January was also ahead of expectations, at 0.5 per cent compared with a predicted 0.3 per cent.
Government bonds and stock futures sold off sharply after the figures were published.
The two-year Treasury yield, which closely tracks interest rate expectations, jumped 0.09 percentage points to 4.37 per cent. Yields rise as prices fall.
Futures contracts tracking the S&P 500 share gauge slumped 1 per cent, while those tracking the tech-heavy Nasdaq 100 fell 1.1 per cent.
The data comes a week after the US central bank defied calls from President Donald Trump to make steep cuts to borrowing costs and instead held its main rate at 4.25 per cent to 4.5 per cent.
On Tuesday, Fed chair Jay Powell vowed to continue “doing our job and stay out of politics”.
This is a developing story
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