How Markets Will React to Inflation Report

This morning, the Bureau of Labor Statistics posted January’s Consumer Price Index. The figures will not definitively change the Federal Reserve’s interest rate policy. Ahead of the CPI report, the Fed reiterated that it was in no hurry to cut interest rates.On Tuesday, Powell said in prepared remarks, “With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance.”Investors already accumulated bank stocks in anticipation of rates staying the same. JPMorgan (JPM) shares are up nearly 15% in 2025. Citi (C) is up by 15.23%, while Wells Fargo (WFC) is up by 13.38% this year.Core inflation, which excludes food and gas, is already on a downtrend. However, shelter, which accounts for most of a consumer’s expenditure, is still high.Investors may ignore the inflation figures for the automotive sector. President Trump already threatened to impose 100% tariffs on Canada’s cars. He already announced 25% tariffs on all steel and aluminum. The input costs for cars will rise, igniting inflation and causing an automotive recession.Watch the bond market’s reaction to the CPI report. The long-term Treasury bond yields fell last week, only to rise again recently.