--- title: "A new five-year low! The annual rate of the U.S. core CPI is lower than expected, and the probability of a rate cut before June has risen to 80%" type: "News" locale: "en" url: "https://longbridge.com/en/news/275910830.md" description: "The U.S. January CPI year-on-year rate was lower than expected, with the overall CPI year-on-year growth rate at 2.4% and the core CPI year-on-year growth rate dropping to 2.5%, the lowest growth rate since March 2021. The market expects the probability of the Federal Reserve lowering interest rates before June to exceed 80%. The significant decline in energy prices is the main reason for the cooling of inflation, while housing inflation increases at a relatively moderate pace. After the CPI data was released, the dollar index fell sharply in the short term, and non-U.S. currencies rose broadly" datetime: "2026-02-13T13:48:14.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/275910830.md) - [en](https://longbridge.com/en/news/275910830.md) - [zh-HK](https://longbridge.com/zh-HK/news/275910830.md) --- > Supported Languages: [简体中文](https://longbridge.com/zh-CN/news/275910830.md) | [繁體中文](https://longbridge.com/zh-HK/news/275910830.md) # A new five-year low! The annual rate of the U.S. core CPI is lower than expected, and the probability of a rate cut before June has risen to 80% The latest data released by the U.S. Bureau of Labor Statistics shows that the Consumer Price Index (CPI) growth in January has further slowed down. This "reassuring" inflation report indicates that price pressures are easing, prompting the market to reassess the Federal Reserve's policy path. **In January, the overall CPI in the U.S. rose by 0.2% month-on-month, lower than the market expectation of 0.3%; the year-on-year growth rate recorded 2.4%, below the expected 2.5%, marking the smallest increase since May of last year.** Looking back to the data since the inflation surge in the spring of 2021, this reading is only slightly above last April's low (2.3%), demonstrating a positive trend in inflation retreat. Excluding the volatile food and energy prices, **the core CPI rose by 0.3% month-on-month, in line with market expectations; the year-on-year growth rate fell to 2.5%, also in line with expectations.** Notably, this is the slowest growth rate since March 2021, marking that core inflation has returned to levels prior to the cost-of-living surge triggered by the COVID-19 pandemic. The market currently believes that **the probability of the Federal Reserve cutting interest rates before April is 30%, while the likelihood of a rate cut before June exceeds 80%.** After the CPI data was released, the dollar index briefly fell nearly 20 points, and the two-year U.S. Treasury yield dropped below 3.40%, hitting a new low since October of last year. Non-U.S. currencies surged, with the euro rising over 20 points against the dollar and the pound rising over 30 points against the dollar. Analysts point out that a deeper analysis of the data components reveals that **the cooling of inflation is mainly due to a significant drop in energy prices, while the stickiness of housing inflation has also eased.** > Energy sector: The energy index fell by 1.5% in January, with the gasoline index dropping sharply by 3.2%, greatly alleviating the upward pressure on overall inflation data. > > Housing sector: Although housing costs remain a major driver of inflation (up 0.2% in January, the largest contributor to the overall CPI increase), this increase appears quite moderate compared to the past few years. In comparison to the data from 2024, there was not a single month with such a low housing inflation reading. The stabilization in this key area provides strong support for the inflation outlook. Ira Jersey, Chief U.S. Interest Rate Strategist at Bloomberg Intelligence, analyzes that given the usual gap between CPI and the PCE (Personal Consumption Expenditures) deflator, the current CPI level suggests that the Federal Reserve is nearing its 2% inflation target. **While the market may not price in an earlier rate cut, it is reasonable to expect a slight reduction in the terminal rate supported by the current data.** However, some economists point out that **the core CPI data in January often exceeds expectations** because the Labor Department's model fails to fully account for one-time price increases at the beginning of the year. This month's increase may reflect both this early-year effect and the transmission effects of Trump's broad tariffs **Despite the slowdown in inflation, a stabilizing labor market may keep the Federal Reserve on hold for some time. Economists expect that inflation may rise temporarily this year due to the transmission of import tariffs and the depreciation of the dollar last year.** Continuously updated ### Related Stocks - [NASDAQ Composite Index (.IXIC.US)](https://longbridge.com/en/quote/.IXIC.US.md) - [The Financial Select Sector SPDR® ETF (XLF.US)](https://longbridge.com/en/quote/XLF.US.md) - [First Trust NASDAQ-100 Equal Wtd ETF (QQEW.US)](https://longbridge.com/en/quote/QQEW.US.md) - [Invesco DB US Dollar Bullish (UUP.US)](https://longbridge.com/en/quote/UUP.US.md) - [Nasdaq, Inc. (NDAQ.US)](https://longbridge.com/en/quote/NDAQ.US.md) - [Fidelity MSCI Financials ETF (FNCL.US)](https://longbridge.com/en/quote/FNCL.US.md) - [Global X NASDAQ 100® Collar 95-110 ETF (QCLR.US)](https://longbridge.com/en/quote/QCLR.US.md) - [Cboe Global Markets, Inc. 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