CNBC Report Shows Daily Open: January's Inflation Reading Was Hotter Than Expected

In January, the consumer price index increased 0.5% over December's figure and annual inflation reached 6.4% - slightly above economists' predictions. Excluding volatile food and energy costs, core CPI came in at 5.6%.

Investors have been content with the Fed's disinflationary narrative, but now that inflation is back at a six-year high, it could be time to abandon expectations for a dovish central bank.

1. Inflation at a Six-Year High

The Federal Reserve's preferred inflation gauge stopped declining in January, suggesting the central bank may need to be more assertive in its fight against persistently rising prices. The Consumer Price Index, an expansive basket of goods and services that tracks changes in everyday costs, rose 6.4% year-over-year in January and 0.5% month-over-month, according to data released Tuesday by the Bureau of Labor Statistics.

Economists had forecast the CPI to increase 6.2% year-over-year and 0.4% month-over-month, but instead found it rose 5.6% annually and 0.4% month-over-month (excluding volatile food and energy prices).

Inflation was higher than last year, due to rising costs for housing, gasoline and natural gas. Shelter costs accounted for half of the monthly price increase and 60% of the annual rise.

"The January CPI beat, particularly in the service sector, was an unexpected disappointment and dims hopes that the Fed will begin to relax its guard soon," Deutsche Bank Chief U.S. Economist Matthew Luzzetti wrote in a research note on Thursday.

The good news is that consumer spending has shifted away from physical goods towards services like travel and entertainment, making it easier for households to save money and reduce the amount of money spent on goods - potentially helping curb inflation.

But that doesn't guarantee price reductions, and economists warn against forecasting inflation's trajectory too closely. It is essential to remember that the CPI report can be distorted by factors like COVID lockdowns or Amazon Prime Days, not giving an accurate picture of inflation over the next few years.

2. The Fed Is Losing Control of Inflation

Over the past year, inflation has become too hot for even the Fed to handle. They've raised interest rates and reduced their asset holdings, but that hasn't been enough to stem further increases in prices.

Investors are beginning to doubt if the Fed can achieve its 2% inflation target, as promised for years. Some analysts even speculate that its efforts at inflation reduction may trigger an economic recession in the long run.

Contrast this with the 1970s, when Federal Reserve's one-to-one rate increases actually reduced inflation. Furthermore, real interest rates rose substantially and stayed there throughout the 1980s, which further suppressed prices.

What the Fed needs to do is get its act together, implement a rule that links rates to inflation and make that part of their official monetary policy. Doing so would give them credibility and reduce uncertainty surrounding their decisions.

Inflation poses a challenge for the Fed, as it drives up consumer spending - an important source of economic growth - which means they will need to raise rates more than expected in order to reduce inflation.

For one year, the central bank has been steadily raising interest rates; and is expected to do so again within the coming months. Already, they've raised the federal funds rate from 0% to 0.33 percent and plan to boost that figure another 2.5 percentage points this year.

This is a major development, as it indicates the Fed has lost control over inflation. Without action taken to address this situation, inflation will remain high and make achieving their 2% goal even harder for them.

3. The U.S. P.I. Index Hits a Seven-Month High

The USPI (Universal Satisfaction Index) is an aspirational measurement of the most peaceful state. States that score either 'one' or 'no' on this index are considered to be the most peaceful, while those with scores of five or higher are considered the least peaceful. The score is calculated based on five indicators that measure peace at the state level.

The five indicators examined in this index include homicide, violent crime, incarceration, police employment and gun ownership. It measures each state's average score on these five indicators over time and compares it with a series of other states with comparable data sets.

Comparing states is straightforward, but analyzing changes over time requires consistent population estimates for all four of the rate per 100,000 indicator scores. This is especially crucial since rates of homicide, violent crime and incarceration can be heavily influenced by factors like birth rate, economic development, education level and population size.

Another noteworthy element of this year's report is the addition of a Metropolitan Peace Index that measures the peacefulness of 61 metropolises across America, providing a more localized perspective of peace. Cities with higher violent homicide, violent crime and combination rates tend to have lower scores than their less violent counterparts.

Though containing violence can come at a cost, there has been an uptick in the number of states that are becoming more peaceful. This trend has been driven primarily by decreases in homicide and violent crime rates as well as recent reductions in prison populations. Unfortunately, budgetary constraints and overcrowded detention facilities limit states' capacity to expand police numbers or incarceration levels; more cost-effective strategies must be employed instead.

4. China Renaissance Is Under Investigation

The disappearance of one of China's top investment bankers has shocked the country's business elite and raised concerns that the country's finance industry could come under increased scrutiny. Recently, several high-profile business figures in China have gone missing without explanation, raising speculation that their whereabouts remain unknown.

Bao Fan, China Renaissance's founder and controlling shareholder, is one of a number of Chinese executives who have disappeared without explanation. His firm has stated that it cannot contact him, yet its business operations remain unaffected.

China Renaissance, established in 2005, provides investment banking services to Chinese entrepreneurs and companies. Additionally, it manages a portfolio of private equity funds and operates a securities underwriting business.

According to its website, the company has advised on more than 980 transactions worth USD$146 billion and operates seven private equity funds that collectively hold RMB39.0 billion in new economy investments.

China Renaissance is a premier private placement advisory firm in the country, providing advice to businesses across technology, medical and enterprise services sectors. Recently it assisted with funding rounds for Xiaodu Technology, Newlink Group, Beisen Keenon Robotics and Weigao Group as well as TenxCloud in its sale to 21 Vianet.

China Renaissance's Investment Banking segment experienced strong revenue and profitability growth in 2021 despite the capital markets downturn. It completed 16 IPO projects and supported 6 Hong Kong IPOs during that period, helping it achieve a multiple of invested capital ("MOIC") of 3.6x, leading to net investment gains totalling RMB474 million in 2021.

5. Tesla Recalls 362,758 Vehicles

Tesla (TSLA) is an American automaker that designs and sells electric cars as well as energy-related products. It offers a diverse lineup of vehicles such as sedans and sport utility vehicles; plus it provides energy storage systems and solar roof panels.

The company has employed an innovative business strategy, and it has seen great success since fuel prices spiked in 2008. As the only automotive manufacturer to develop a battery-electric vehicle that can rival traditional gas-powered cars, Nissan has set itself apart from competitors by taking on this unique challenge.

It has achieved this by crafting a product that appeals to customers, rather than trying to mass produce an inexpensive car that could be mass-produced and sold. This strategy has allowed it to blossom into an international corporation.

As of December 31, 2017, the Company had produced and sold 3.6 million electric vehicles worldwide. Its current model lineup consists of the Model 3 compact sedan, Model S mid-size luxury sedan, and the Model X luxury SUV.

These vehicles utilize Tesla Electric Car's Full Self-Driving (FSD) beta software, which enables thousands of drivers to test out unfinished driver assistance features on public roads in the U.S. While FSD doesn't make a Tesla electric car fully autonomous, it does enable certain tasks like taking over driving at intersections or traveling straight ahead from a turn-only lane without requiring human input at all times.

NHTSA expressed concern that the FSD software could enable vehicles to act unsafely around intersections. They cited examples such as running yellow lights, disobeying speed limits, and proceeding straight ahead from a turn-only traffic lane.