In this morning’s data, the Consumer Price Index increased 0.3% in January, as expected, and is 1.4% higher on annual basis. Prices for Gasoline were higher for the month, encapsulating most of the increase in the headline figure, while prices for Used Cars and Trucks and New Vehicles were lower. The core rate, which excludes prices for food and energy, was flat for January and up 1.4% on an annual basis, both lower than expectations. Overall, inflation has yet to become an issue in the current environment. However, with additional stimulus pending and a likely rebound in activity as vaccines are administered, inflation expectations could change in the coming months. The Federal Reserve has already indicated they are willing to remain accommodative as we work through this process, to allow the labor market and other parts of the economy to recover. The timing of when their stance will change, given how fast inflation may appear and persist, will be key as we work through this process. In all, bond yields moved lower following the report and equity futures are higher as we head into the market open.
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