Compounding the implications of strong job growth, U.S. consumer inflation expectations surged to 3.3%—the highest level since 2008—according to the University of Michigan’s January survey. This rise has stoked concerns over potential tariff-related price increases under the incoming Trump administration. With inflationary pressures building, nearly one-third of consumers now anticipate that rising costs will impact household spending, especially on big-ticket items.

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The survey also showed a dip in overall consumer sentiment to 73.2, reflecting growing unease about future economic conditions. These inflationary trends and a resilient labor market bolster the argument for the Federal Reserve to pause further rate cuts, as market participants reassess monetary policy expectations. Banks and investors alike will be closely watching the Fed’s next steps, as inflationary risks threaten to complicate the delicate balance between supporting growth and controlling prices.

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