January inflation ran hot, and the odds of Fed interest rate cuts fell as Consumer Price Index total CPI inflation accelerated to 3.0%, the highest rate since June 2024.

The unexpected rise in price pressures prompted futures traders to increase the odds that the Federal Reserve will hold the benchmark rate at its current range beyond May.

January’s consumer price index exceeded expectations, leading to diminished hopes for multiple Federal Reserve rate cuts. With inflation at 3.0% and tariffs looming, Fed officials are cautious about easing policy too quickly while monitoring economic impacts.

Consumer prices rose 3%, extending a recent pattern of increases at the start of the year that likely derails the prospect for Federal Reserve rate cuts anytime soon.

Bond traders now expect the earliest Fed rate cut in December, as inflation concerns dampen hopes for a first-half ease. Despite inflation worries, recession probability remains low at 20%, with future economic focus shifting to potential tax cuts and deregulation.

Faced with the threat of rising inflation, the U.S. Federal Reserve will wait until next quarter before cutting rates again, according to a majority of economists in a Reuters poll who previously expected a March cut.

Inflation picked up for a fourth straight month in January amid another rise in in food and energy costs, possibly setting the stage for a year of halting progress in the battle to slow consumer price increases as President Donald Trump rolls out myriad import tariffs.

Inflation picked up at a higher pace than expected in January, leaving the Federal Reserve playing a waiting game to see the impact of tariffs and other policies on price pressures.