D5951-BOI-CB-Daily-Blog

US inflation rises further

Bond yields in the US edged higher again yesterday following the release of retail sales and inflation data, while the dollar also strengthened further for a time before easing back

The headline rate of CPI inflation in the US rose to 2.5% in January, its highest level since early 2012, while the core rate edged up to 2.3%. Retail sales increased for a fifth consecutive month last month and point to (continuing) solid consumer spending at the start of 2017

Fed Chair Janet Yellen said on Wednesday that a further increase in interest rates would be ‘appropriate’ if inflation and employment ‘continue to evolve in line with…expectations’, so the latest inflation readings strengthen the case for a rate hike sooner rather than later

Sterling is little changed against the euro at 85p.  The next key UK data release is tomorrow’s UK retail sales for January. There was a particularly large fall recorded in December – of almost 2% from November – so there may be some payback for that in January (the consensus forecast is for an increase of 1%)

Data due today include jobless claims and housing starts in the US