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US consumer prices rise more than expected in January

The unadjusted annual consumer price index in the U.S. rose by 2.1% for the second consecutive month in January, surprising markets on the high side.

Annual core inflation, which excludes food and energy prices, was unchanged at 1.8% in January as compared to the prior month, the U.S. Bureau of Labor Statistics said.

On a monthly basis, consumer prices increased by 0.5% in January after seasonal adjustments, compared to a revised 0.2% figure in the prior month. Previous data showed the monthly increase in seasonally adjusted consumer prices was 0.1% in December 2017.

Core consumer prices increased by 0.3% in January as compared to a downwardly revised change of 0.2% in December 2017. The apparel index, which was marked as a source for "upside risk" to the numbers in January by TD Securities, saw a sharp increase of 1.7% after registering declines for the previous three months.

The seasonally adjusted energy price index rose by 3.0% in January after declining by 0.2% in December 2017.

The stronger-than-expected readings can "reinforce expectations that the Federal Reserve will have little choice but to tighten monetary policy more aggressively," Fawad Razaqzada, a market analyst at Forex, said in a note. "As a result, we may see renewed selling pressure coming into the bond and stock markets, while the dollar could rise against her weaker rivals."

Headline inflation is expected to hit 3% in June, with core inflation rising to above 2% by as early as March, ING Research noted, citing a rise in oil prices and a weak dollar. "Indeed, we still see more upside risks to our forecast for three Federal Reserve rate hikes this year."