The latest consumer price index reading for January signaled a further easing in headline inflation, a development that reshaped market positioning late on Friday as traders and strategists digested the implications for monetary policy and asset prices.
Data from the U.S. Bureau of Labor Statistics showed headline CPI rose 2.4% on a year-over-year basis in January, below the 2.5% that had been expected and down from December's 2.7% pace. On a month-to-month basis the headline index increased 0.2%, also coming in under consensus of 0.3%. Core CPI - which strips out food and energy - was reported as being in line with expectations on both the monthly and yearly measures.
The inflation report arrived just days after a notably strong January nonfarm payrolls report. That combination - a robust labor market together with cooling inflation - nudged market participants to modestly increase the odds they attach to Federal Reserve rate cuts taking place this year.
Market reactions were immediate. After oscillating between gains and losses during the trading day, U.S. equities moved higher. At the same time, investors stepped into bonds, pushing yields lower as they reassessed the likely path of monetary policy. For those tracking broad equity benchmarks, popular exchange-traded funds that follow the S&P 500 include SPDR S&P 500 ETF Trust (SPY), Vanguard S&P 500 ETF (VOO), and iShares Core S&P 500 ETF (IVV).
Below are a series of perspectives from market strategists, economists, and portfolio managers reacting to the January CPI figures.
Gina Bolvin, president of Bolvin Wealth Management Group
"This CPI report didn’t just cool inflation-it shifted what matters next. At 2.4%, inflation is fading into the background, and behavior is doing more of the work than policy. Consumers are pushing back, companies are absorbing costs, and pricing power is thinning.Markets responded because this gives the Fed flexibility-and shifts the investor focus away from rate cuts and back to fundamentals. The next phase won’t reward macro bets, it will reward earnings discipline and balance-sheet strength."
Bolvin highlighted behavioral adjustments by consumers and firms as important forces complementing monetary policy in pushing inflation lower. Her comments emphasized that investor attention may now move from headline macro bets toward company-level fundamentals, including earnings and balance-sheet robustness.
Keith Lerner, chief investment officer and chief market strategist at Truist
"Today’s CPI data didn’t materially change expectations for Fed policy, with the next move in the Fed funds rate still expected around June. The bigger reaction has been in the bond market, where lower yields are providing a supportive backdrop for equities. Within stocks, today’s leadership is notable. We’re seeing strength in the S&P 500 equal-weight index, small caps, and sectors such as industrials, materials, utilities, healthcare, and real estate. That points to continued broadening beneath the surface, with equities increasingly driven by technology disruption and an ongoing rotation into cyclical and previously lagging areas of the market."
Lerner noted that while the CPI print did not meaningfully alter the expected timing of Fed moves - still centered on June in his view - the market’s response in fixed income is creating a friendlier environment for equities. He flagged specific areas of equity strength, including small-cap stocks and a range of sectors from industrials and materials to utilities, healthcare and real estate, suggesting a widening of leadership beyond large-cap growth.
Jake Dollarhide, CEO of Longbow Asset Management
"Today’s cooler than expected CPI print calmed markets after a week full of angst and volatility for investors with Treasury yields now seeing their lowest levels of the year which could be a nice harbinger for stocks in the weeks ahead. All eyes are on when (or if) the ten year will drop back below 4% (and stay there)."
Dollarhide tied lower Treasury yields to improved calm in markets and said that continued declines in the 10-year yield below the 4% threshold would be watched closely for their potential implications for equities.
Diane Swonk, chief economist at KPMG U.S.
"The CPI data came in cooler than expected, which is always welcome. The headline is obscuring some of the underlying inflation due to the loss in data associated with the government shutdown.The overall index posted its coolest reading since May 2025, with a 2.4% increase. However, a loss of data during the October government shutdown resulted in a zeroing out of many price hikes in October. I will take small wins, knowing that the Fed is still in ’wait-and-see’ mode on inflation and there is more than meets the eye in the inflation data. Do not look for the Fed to declare ’mission accomplished’ until well into the second half, after we know for sure that the tariff-induced inflation has faded."
Swonk cautioned that headline readings may be understating some underlying pressures because of data losses tied to a government shutdown, and she urged caution in assuming the Fed will quickly consider policy easing. She pointed to the headline index’s lowest reading since May 2025, while noting distortions from October’s data treatment.
Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics
"A good CPI report in the round. Core goods prices ex-used autos up most for 3 years, but driven by one-time hikes in tobacco and Spotify’s prices, not tariffs. Services price rises smaller than last (year), outside health & airfares. Path still clear for Fed to ease again this summer. We provisionally estimate January’s CPI data point to a 0.23% rise in the core PCE deflator and a drop in the inflation rate to 2.9%, from 3.0% in December. But we’re still awaiting Dec’s PCE print and Jan’s PPI data, so things could change."
Tombs described the report as broadly favorable, noting that certain core goods increases were tied to specific one-off price moves and that services inflation was generally softer outside of health care and airfares. He added a provisional estimate translating CPI into a core PCE implication and reiterated that upcoming data could alter the assessment.
Jason Furman, professor of economics at Harvard
"Core CPI inflation rose during the month of January. But it fell and was relatively muted over longer periods of time--although still some concern the numbers a bit lower due to shutdown-related quirks. This is reassuring on inflation, is consistent with my view that underlying inflation is about 2.5% with some downward pressure.Earlier this week we got good data on jobs. So the Fed can afford to watch and wait before doing anything."
Furman emphasized that while core CPI increased in January, longer-term measures showed more muted movement. He characterized the overall signal as consistent with underlying inflation near 2.5% and suggested the Fed could remain on hold to assess further data in light of the recent strong jobs report.
Mohamed El-Erian, ex-CEO of PIMCO
"U.S. core CPI inflation landed right in line with consensus forecasts while headline was somewhat softer. That’s good news. Less good is, as other inflation data will show, the U.S. economy is now in its sixth consecutive year of inflation running above the Federal Reserve’s target."
El-Erian described the mixed nature of the release as positive on balance but warned that, taken with other measures, the economy has experienced an extended period of inflation above the Fed’s stated target.
Taken together, the commentary from market participants and economists reflected a blend of relief at softer headline inflation and caution about interpreting the signal too quickly. The interplay between a strong labor market and cooler price readings has led investors to slightly increase odds of easing later in the year while also rewarding evidence of breadth in equity leadership and driving demand for longer-duration bonds.