US consumer prices rise 0.4% on the month, above expectations

What happened

The US consumer price index increased 0.4% over the month, a larger rise than economists had expected. The reading was lower than the increase recorded in the preceding month, but analysts described the pace of price growth as still uncomfortably high.

The data landed at what reporting described as a critical juncture for the Federal Reserve, which is weighing its next decision on interest rates.

Why it matters

Consumer price data is one of the main inputs into expectations for Federal Reserve policy. When inflation comes in above forecasts, market pricing for the path of interest rates can shift, and that pricing feeds through to the dollar, to Treasury yields and to the valuation of equities.

Gold is exposed because it pays no yield, so changes in interest rate and inflation expectations alter its relative appeal. Crypto also tends to react to shifts in expected liquidity conditions. Because the figure surprised relative to forecasts, the reaction channel is the repricing of Fed expectations rather than the level of prices alone.

What to watch

Attention turns to the Federal Reserve's upcoming decision on interest rates and any commentary from policymakers on how they read the inflation picture after this report.