U.S. Inflation Falls to 3.7% in January (CPI-E), Markets React

U.S. core personal consumption expenditures (CPI-E) inflation edged down to 3.7% in January (annual rate), the lowest since September 2023, per the Bureau of Economic Analysis. The Federal Reserve is closely monitoring this moderation as it weighs its next policy decision on February 14, 2026. The labor cost index rose 0.3% month-over-month, while energy prices remained the largest contributor to the CPI. The preliminary reading, released after the opening of major financial markets, sent risk-on sentiment higher early in the session as traders priced in a potential pause in rate hikes. However, officials will consider broader economic data, including the personal consumption expenditure (PCE) price index and the unemployment rate, before deciding on policy direction.