Consumer inflation in the US slowed more than expected in January, raising hopes that the US Federal Reserve could consider cutting interest rates later this year, although policymakers are likely to wait for clearer signs of sustained cooling.
According to data released by the US Department of Labour on February 14, the consumer price index (CPI) rose 2.4 percent year-on-year in January, down from 2.7 percent in December. This marks the lowest inflation reading since May 2025 and was slightly below market expectations.
On a month-on-month basis, CPI increased 0.2 percent, easing from December’s 0.3 percent rise.
For Indian equities, softer US inflation is generally positive. Expectations of a potential Fed rate cut tend to weaken the dollar and ease global bond yields, improving risk appetite for emerging markets such as India. This could support foreign portfolio inflows into frontline indices like the Sensex and Nifty 50.
In recent days, Indian IT stocks have crashed, one of the reasons being the uncertainty over US Fed's rate cuts. IT stocks, which derive a significant share of revenues from the US, may benefit from improved client spending sentiment if borrowing costs decline and recession fears ease. A softer rate outlook in the US could also stabilise valuations of large-cap technology exporters, which are sensitive to US economic growth and currency movements.
The moderation in the US headline inflation was largely driven by a 1.5 percent monthly decline in overall energy costs, particularly petrol prices. However, food prices continued to rise, increasing 0.2 percent from December and 2.9 percent compared with a year earlier.
Excluding the volatile food and energy components, core inflation stood at 2.5 percent, marginally lower than in December. Core readings are closely tracked by the Fed to assess underlying price pressures.
Despite the cooling trend, affordability concerns persist, especially among lower-income households. Recent tariff measures introduced under US President Donald Trump have raised business costs in sectors such as furniture and appliances, although companies have absorbed part of the impact by building inventories and limiting price pass-through.
Economists say the latest data is encouraging but insufficient for immediate policy easing. The Fed, which cut rates three times last year, has paused further action as it seeks to bring inflation sustainably back to its 2 percent target.