US inflation falls to 2.4% as Donald Trump gets ‘everything he wants except’ interest rate cut

Prior to today’s announcement from the BLS, economists had priced in the CPI inflation coming in at 2.5 per cent, based on the Dow Jones consensus.

Excluding food and energy, core CPI also was up 2.5 per cent over the period. On a monthly basis, the all-items index was up 0.2 per cent while core gained 0.3 per cent. The forecast had been 0.3 per cent for both.

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Today’s data will be one of the key data factors examined by policymakers on the Federal Open Market Committee (FOMC) when they meet to discuss the trajectory of US interest rates.

Odds on the Fed slashing the base rate over the next few months were reduced after job data showed the US economy added twice as many jobs than expected last month.

Following today’s BLS reform, Treasury yields fell in reaction to inflation cooling, which could signal that interest rate cuts are imminent.

The 10-year Treasury yield, which affects the base rate on consumer debt and mortgages, was recently as low as 4.09 per cent.

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Isaac Stell, an investment manager at Wealth Club, said: “US inflation has surprised to the downside, showing disinflationary progress is the US is on track and that rate cuts could well be on the cards as we move through 2026.

“Economic conditions in the US are currently showing signs of improvement in the form of solid GDP growth and a stabilising labour market. These latest positive inflation figures mean that if the disinflation trend continues, policy makers are likely to ease rates as 2026 progresses.

“Bond markets are currently pricing in two cuts for 2026, starting in May, which would bring interest rates down to a range of 3.00-3.25%, a level at which many analysts deem to be a sensible neutral rate.

“With tariff related goods inflation expected to peak in the first half of the year and rental inflation set to continue to normalise, the signs look positive for inflation to continue its downward trend.

In the near term however, policy makers may deem it appropriate to keep rates steady for a couple more meetings whilst they continue to survey incoming data and make sure the disinflation seen today, is the start of a trend and not just a blip.”

James Bentley, the director of Financial Markets Online, added: “This week’s economic data will give President Trump everything he wants, except an interest rate cut.

“Inflation is cooling and America’s job creation engine is running hot. The ‘January effect’ – in which businesses often hike prices at the start of the year – was less pronounced last month, helping both the monthly and annual inflation rates to come in below expectation.

“This welcome surprise, which brings annual CPI closer to the Federal Reserve’s two per cent target, gives America’s interest rate-setters greater leeway to reduce rates next month.

“But despite the President’s vocal lobbying for rapid rate cuts, the Fed is likely to hold fire on further monetary stimulus following January’s blockbuster jobs report.

“Job creation is surging and unemployment falling, and the Fed will see no need to jeopardise the progress on inflation to stimulate America’s already robust economy. For now the President will have to make do with bragging rights rather than the imminent prospect of a rate cut.”