The January inflation data in the United States were released tonight, and they were yet another surprise. Consumer prices have risen by an average of 7.5 percent in the last year, led by a staggering 27 percent increase in the cost of energy, or gasoline as it is known in the United States.
Even after accounting for large increases in the cost of energy and food, US inflation was still around 6%. Both are the most significant annual price increases that American households have faced in 40 years.
Borrowers in the United States may face yet another cost-of-living increase next month, as the Federal Reserve prepares to raise interest rates for the first time since December 2018.
Although the majority of US consumers are locked into long-term (usually 30-year) fixed-rate mortgages, rising interest rates only effect them if they are purchasing a new home or moving and refinancing.
The Fed was largely expected to begin gradually raising interest rates, by 25 basis points, from 0-0.25 percent to a target range of 0.25-0.5 percent, until last night.
However, markets are now betting on a 66 percent chance of a 50-basis-point rate hike next month, thanks to an even higher-than-expected consumer price index (CPI) figure of 7.5 percent.
