A preliminary report from the University of Michigan said U.S. consumers are expecting inflation in the year ahead to hit 4.3%, the highest such reading since 2023.
Economists pointed to the possibility of tariffs on a wide range of products imported into the United States, which President Donald Trump has proposed and would ultimately push up prices for U.S. consumers.
The consumer-sentiment data followed a mixed report on the U.S. job market that arrived before the U.S. stock market opened. It showed hiring last month was less than half of December’s rate, but it also included encouraging nuggets for workers: The unemployment rate eased, and workers saw bigger gains in average wages than economists expected.
All the data, taken together, could keep the Federal Reserve on hold when it comes to interest rates. The Fed began cutting its main interest rate in September in order to relax the pressure on the economy and job market, but it warned at the end of the year that it may cut fewer times in 2025 than it earlier expected given worries about inflation staying stubbornly high.
Wall Street would almost always prefer lower interest rates because they can encourage investors to pay higher prices for stocks and other investments. The downside is they can give inflation more fuel.