Market Pulse: Inflation Spikes, Trade Moves & Growth Signals

This week, financial markets were marked by higher-than-expected inflation data, signs of a slowdown in consumption and trade policies. The consumer price index rose 0.5% in January, while core inflation advanced 0.4% to a year-on-year rate of 3.3%, up from 3.1% in the previous month. Of concern was the increase in non housing services inflation, which reached its highest level in a year. Although some analysts attribute this rebound to seasonal factors and recent natural disasters, the market reacted with volatility in Treasury bond yields. Wholesale inflation also showed signs of strength, although key components for the Fed's preferred metric, the PCE index, suggest that its reading may be more moderate. Despite inflationary pressure, Fed Chairman Jerome Powell urged not to overreact to one or two negative inflation readings, highlighting the strength of the economy and assuring that monetary policy is well positioned to deal with uncertainty.

On the consumption front, retail sales unexpectedly fell by 0.9% in January, reversing December's growth, while industrial production grew by 0.5%, beating expectations of 0.3%. On the other hand, household indebtedness reached a record $18 trillion, with a 3.6% delinquency rate, the highest since 2020, although still below pre pandemic levels.

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