Mid-session market 02/14: CPI paves the way for FED to continue raising interest rates

US stock market reacts unfavorably as CPI rose 0.5% in January, the highest in 3 months with YoY also higher than forecast, largely from lagging housing cost data (lagging indicators). However, Powell's favorite “super” core CPI (core CPI excluding housing) shows a positive inflation trend with only a 0.27% increase last month, creating mixed sentiment among investors and preventing a deep sell-off in the morning trading session.

Before today's CPI data release, BLS slightly changed the calculation method for the weighted components of the inflation basket related to consumption (weighted components of spending category), pushing CPI up by an average of 0.1% per month over the past 12 months.