The Core CPI rate in the US expectedly grew by 0.2 per cent in January, which amounted to a hike in consumer inflation to 2.5 per cent on a year over year basis.
Thus, the trend of steep growth in inflation, which was initiated in October, remained prevailing in the first month of 2020 as well.
Inflation is already way above FED's 2 per cent symmetric target rate, exceeding it by half a per cent. This means that the FOMC is now more likely to consider implementing a slightly more hawkish monetary policy stance in order to curb any potential unwanted rallies in consumer prices.
US Inflation Rate. Image source: TradingEconomics.com
If the Committee does indeed become slightly more hawkish in its subsequent statements, the US stock market and the dollar are likely to both benefit from the resulting optimistic environment.
Additionally, the American industry is also going to benefit from a slightly tighter monetary policy stance implemented by the FOMC.
Such developments are going to be reflected on the stock market, particularly on the major US indices.
A stabilisation of the American industry is going to bolster the Dow Jones Industrial Average, which is currently recovering from a short-term correction that can be seen on the daily price chart below.
DJI 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
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