JN Fund Managers’ Daily Market Update -February 13, 2020

US Core Inflation Increases in January 2020

The United States’ (U.S.) Consumer Price Index (CPI) for the 12-Months ending January 2020 rose to 2.5% relative to 2.3% recorded in December 2019, representing the largest 12-Months gain since October 2018. Month-over-Month (MoM), the CPI, which measures inflation by examining the changes in the weighted average prices of goods and ser-vices, rose on a seasonally adjusted basis by 0.1%. The MoM inflation movement was due to an increase in the indexes for shelter, food and medical care services which was off-set by declines in the energy index. Core CPI (inflation excluding food and energy prices) increased by 0.2% in January relative to 0.1% in December 2019.

The US economy is currently in its 11th year of expansion supported by consumer spending, which is being sustained by the strength of the labour market. However, as at De-cember 2019, the US Federal Reserve’s (Fed) preferred measure of core inflation, the core personal consumption expenditures (PCE) index only rose by 1.6% on a year on year basis, below the Fed’s 2% target. January’s PCE index, which will be released later this month, is a key piece of data that will weigh on the Feds rate decision due March 2019.

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