Summary of US Inflation Report

On February 13, 2026, the latest US inflation report indicated a 0.2% month-on-month increase in headline inflation and a 2.4% year-on-year rise, slightly below market expectations. Core inflation, which excludes food and energy prices, rose by 0.3% month-on-month and 2.5% year-on-year, aligning with analyst forecasts.

Key Findings

• The January inflation data did not show the expected surge, indicating a gradual easing of price pressures.
• Rent growth slowed significantly to 0.2%, which had previously contributed to high core inflation.
• The impact of tariffs on prices remains limited, with overall goods prices unchanged from the previous month.
• Service sector prices increased by 0.4% month-on-month, influenced by volatile airfares.

Implications for the Federal Reserve

The Federal Reserve is in a comfortable position following this report. The absence of a significant price surge allows the Fed to maintain current interest rates while awaiting further data. Immediate rate cuts are unlikely, but the potential for three to four rate cuts by the end of the year remains realistic if inflation continues to moderate.

Market Reactions

The financial markets reacted moderately to the report:

• The EUR/USD pair rose from 1.1860 to 1.1880, indicating a slight weakening of the US dollar.
• Gold prices increased from approximately 4960 USD to 5000 USD per ounce.
• US Treasury yields fell, with the ten-year yield dropping below 4.07%.
• Futures on the S&P 500 showed a mild positive response from equity investors.

Conclusion

The January inflation report suggests a gradual disinflation process, providing the Federal Reserve with the flexibility to monitor economic conditions before making any policy changes. The market's reaction indicates a growing expectation of potential rate cuts later in the year, reflecting investor sentiment towards a more dovish monetary policy.