CPI inflation climbed at a 7.5% annual rate in January, the Bureau of Labor Statistics reported this morning. That was above the 7.3% expected by economists surveyed by Bloomberg and a big jump from the 7.0% annual rate reported in December.
The inflation number just about guarantees that the Federal Reserve will raise its short-term benchmark interest rates at its March 16 meeting from the current 0% to 0.25% range.
Now the issue is whether the central bank will increase rates by 25 bais points or 50. A 25 basis point increase would be in line with Federal Reserve patterns. A 50 basis point move would be a stronger than usual message to the financial markets.
Today those markets are convinced that 50 basis points (it takes 100 basis points to make one percentage point) is in the cards. The CME Fed Watch Tool shows that according to the Fed Funds futures market, the odds of a 50 basis point increase in rates at the March 16 meeting have climbed to 99.5% from 24% on February 9 and from 7.3% on January 10.
