U.S. consumer prices rose more than expected in January, with a measure of underlying inflation posting its biggest gain in a year, strengthening expectations that price pressures will accelerate this year and prompt a faster pace of interest rate increases from the Federal Reserve.
The fairly strong inflation report from the Labor Department on Wednesday could put more pressure on U.S. financial markets, which were spooked by a surge in annual wage growth in January.
Inflation concerns sparked a sell-off on Wall Street and boosted benchmark U.S. Treasury yields to a four-year high.
There are fears that inflation, which is seen as being driven by a tightening labor market and increased government spending, could force the Fed to be a bit more aggressive in raising rates this year than is currently anticipated. That would slow economic growth. The U.S. central bank has forecast three rate hikes for this year, with the first increase expected in March.