US consumer prices rose by slightly more than forecast in January, but markets are reacting well – suggesting that expectations had climbed and risk had been sufficiently trimmed ahead of the release. According to data published by the Bureau of Labor Statistics this morning, the headline consumer price index rose 6.4% in January from the same period last year, up 0.5% on a month-over-month basis. Economists polled by the major data providers ahead of the release projected a 6.2% annual gain and a 0.5% jump relative to December.

A seasonally-adjusted 2.4 percent month-over-month gain in gasoline prices partially offset a -7.0% drop in the prior month, but shelter costs kept rising, up 0.7% after posting an 0.8% gain in the prior month. Food prices climbed 0.5%, accelerating from December’s 0.4% gain. New vehicle costs rose 0.2%, and used car and truck prices tumbled -1.9% from the prior month.

Core services excluding shelter—often known as “supercore” inflation—showed no meaningful decline, suggesting that Jerome Powell’s “higher for longer” message will remain in place.

With highly-volatile food and energy components excluded, core prices rose 5.6% percent year-over-year, up 0.4% over the prior month. Markets were prepared for a print closer to 5.5%.

Two- and ten-year bond yields jumped and equity indices initially slid lower after the data hit the wires, but both asset classes have reversed direction. Implied odds on a 25 basis point hike at the March Federal Reserve meeting are essentially unmoved on the day, and the dollar is back on the defensive.