Investing.com -- Wall Street's focus on Friday was on the January consumer inflation report, which showed a moderation in headline prices from December.
U.S. Bureau of Labor Statistics data showed a 2.4% Y/Y rise in the headline consumer price index (CPI) in January, below the expected figure of 2.5% and decelerating from December's 2.7% reading. On a M/M basis, headline CPI ticked up 0.2%, also below the consensus of 0.3%. Meanwhile, core CPI came in-line on both a M/M and Y/Y basis.
The inflation print comes just days after a blowout January nonfarm payrolls report. With a seemingly strong labor market and inflation moving in the right direction, traders and watchers of monetary policy slightly upped their bets for Federal Reserve interest rate cuts this year.
After swinging between gains and losses, U.S. stocks had pushed higher. Investors also snapped up bonds as they assessed the path of monetary policy, sending yields lower. Here are some popular exchange-traded funds that track the benchmark S&P 500 index: SPDR® S&P 500® ETF Trust (NYSE:SPY), Vanguard S&P 500 ETF (NYSE:VOO), and iShares Core S&P 500 ETF (NYSE:IVV).
See below for various reactions from experts and analysts to the CPI data:
Gina Bolvin, president of Bolvin Wealth Management Group:"This CPI report didn't just cool inflation -- it shifted what matters next. At 2.4%, inflation is fading into the background, and behavior is doing more of the work than policy. Consumers are pushing back, companies are absorbing costs, and pricing power is thinning.
Markets responded because this gives the Fed flexibility -- and shifts the investor focus away from rate cuts and back to fundamentals. The next phase won't reward macro bets; it will reward earnings discipline and balance-sheet strength."
Keith Lerner, chief investment officer and chief market strategist at Truist:"Today's CPI data didn't materially change expectations for Fed policy, with the next move in the Fed funds rate still expected around June. The bigger reaction has been in the bond market, where lower yields are providing a supportive backdrop for equities.
Within stocks, today's leadership is notable. We're seeing strength in the S&P 500 equal-weight index, small caps, and sectors such as industrials, materials, utilities, healthcare, and real estate. That points to continued broadening beneath the surface, with equities increasingly driven by technology disruption and an ongoing rotation into cyclical and previously lagging areas of the market."
Jake Dollarhide, CEO of Longbow Asset Management:"Today's cooler than expected CPI print calmed markets after a week full of angst and volatility for investors with Treasury yields now seeing their lowest levels of the year which could be a nice harbinger for stocks in the weeks ahead. All eyes are on when (or if) the ten year will drop back below 4% (and stay there)."
Diane Swonk, chief economist at KPMG U.S.:"The CPI data came in cooler than expected, which is always welcome. The headline is obscuring some of the underlying inflation due to the loss in data associated with the government shutdown.
The overall index posted its coolest reading since May 2025, with a 2.4% increase. However, a loss of data during the October government shutdown resulted in a zeroing out of many price hikes in October.
I will take small wins, knowing that the Fed is still in 'wait-and-see' mode on inflation and there is more than meets the eye in the inflation data. Do not look for the Fed to declare 'mission accomplished' until well into the second half, after we know for sure that the tariff-induced inflation has faded."
Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics:"A good CPI report in the round. Core goods prices ex-used autos up most for 3 years, but driven by one-time hikes in tobacco and Spotify's prices, not tariffs. Services price rises smaller than last (year), outside health & airfares. Path still clear for Fed to ease again this summer.
We provisionally estimate January's CPI data point to a 0.23% rise in the core PCE deflator and a drop in the inflation rate to 2.9%, from 3.0% in December. But we're still awaiting Dec's PCE print and Jan's PPI data, so things could change."
Jason Furman, professor of economics at Harvard:"Core CPI inflation rose during the month of January. But it fell and was relatively muted over longer periods of time--although still some concern the numbers a bit lower due to shutdown-related quirks.
This is reassuring on inflation, is consistent with my view that underlying inflation is about 2.5% with some downward pressure.
Earlier this week we got good data on jobs. So the Fed can afford to watch and wait before doing anything."
Mohamed El-Erian, ex-CEO of PIMCO:"U.S. core CPI inflation landed right in line with consensus forecasts while headline was somewhat softer.
That's good news. Less good is, as other inflation data will show, the U.S. economy is now in its sixth consecutive year of inflation running above the Federal Reserve's target."