Market futures are down (ES=F, NQ=F, YM=F) as Consumer Price Index (CPI) data for January came in slightly hotter-than-expected. As the market begins to price in the new reading, investors are looking to the Federal Reserve for cues as to what the inflation data could mean for future monetary policy decisions.

Yahoo Finance Reporter Alexandra Canal joins the Live show to break down the latest CPI print and where inflation is showing up across categories.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

BRAD SMITH: We are less than 30 minutes away from the opening bell on Wall Street. Futures sliding as investors digest January CPI report. Inflation coming in hotter than the Street expected. Yahoo Finance's Alexandra Canal joins us at the desk with more. We're watching the futures reaction here this morning. Ali, help us break down some of these numbers.

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ALEXANDRA CANAL: Yeah, I mean, economists expected this would be the first report since March 2021 that we would finally get headline annual inflation below 3%. That just did not happen. Inflation coming in hotter than expected.

3.1% over the prior year in January and also higher on a month-over-month basis there. Now if you dig in closer to this report, there are a few notable callouts. One is a shelter index. That rose 6% on an unadjusted annual basis. Sticky shelter inflation has what is kept core inflation particularly high, and that's leading to the Federal Reserve to be a bit more cautious when it comes to rate hikes down the line-- excuse me, rate cuts down the line, which markets definitely want.

You can see that reflected in the major indices. They are lower today on the heels of this inflation print. And it looks like markets are now pricing in a June cut, completely erasing those expectations for a cut to come in May. So, you know, when we've0 get these higher-than-expected reports and we get hotter inflation, that just bolsters the Federal Reserve's monetary policy to keep rates where they are for now, which investors obviously don't want to see at the current moment.

RACHELLE AKUFFO: Indeed, the Fed continuing to say, we haven't beaten inflation yet. At least this latest print adding to that.