Annual Inflation Slows for 7th Month as CPI Rises 6.4% in January
By The Consumer Price Index (CPI) – a closely watched measure of inflation that tracks fluctuations in the costs of everyday goods and services – rose 6.4% in January compared to the same month one year ago.[0] This marked the seventh consecutive month of cooling in annual inflation since peaking at 9.1% in June, the highest reading since 1981.[1]
According to the Bureau of Labor Statistics, the index for shelter, or rent prices, was “by far” the largest contributor to the monthly increase, accounting for nearly half of the uptick, while prices for food and gas also fueled the outsized gains.[2] January's Core CPI (excluding the volatile food and energy components) was in line with forecasts, increasing by 0.4%. The primary causes of the rise in core inflation during January were shelter, motor vehicle insurance, and clothing.[3]
The rate of inflation from February of the previous year to January of the current year was 6.4%, a decrease of 0.1% from[4] January saw a 0.4% increase in the Core Consumer Price Index (CPI) that omits food and fuel prices, in line with the corresponding growth in December. In the period from February of last year to January of this year, this index experienced an increase of 5[4] In December, the rate was 5.7%.[5]
The cost of food has gone up 10.1% since January of last year, the ninth-consecutive yearly rise in prices in that category, although it is lower than what it was in August.[6] Prices for new vehicles rose 0.2%, while used car prices fell 1.9%.[7]
Since March of last year, the Federal Reserve has increased interest rates by 4.5 percentage points in order to contain inflation.[8] Federal policymakers have indicated that there may be two additional rate increases of 0.5 percent within the next few months.[8]
Fed Chairman Jerome Powell has acknowledged that disinflation has begun, but the Fed chairman also says there is still a long way to go to reach the central bank’s desired 2.0% inflation rate.[9] He cautioned it would likely be 2024 before inflation returns to the Fed's target rate of 2%.[8]
However, a string of hotter inflation readings could suggest reinvigorating and more persistent inflation pressures.[0] Such a situation could necessitate policymakers to increase rates to a level greater than what is currently predicted.[4]
This narrative is evolving and will be refreshed.[5]
0. “Inflation surged 6.4% in January, higher than expected” New York Post , 14 Feb. 2023, https://nypost.com/2023/02/14/inflation-surged-6-4-in-january-higher-than-expected/
1. “January CPI Report Shows Annual Inflation Cooled” The Wall Street Journal, 14 Feb. 2023, https://www.wsj.com/articles/us-inflation-january-2023-consumer-price-index-f080e30b
2. “Inflation Fell To 6.4% In January—But Is Still Worse Than Economists Expected As Rent, Food And Gas Prices Keep Rising” Forbes, 14 Feb. 2023, https://www.forbes.com/sites/jonathanponciano/2023/02/14/inflation-spiked-64-in-january-worse-than-economists-expected-as-rent-food-and-gas-prices-keep-rising
3. “January CPI Report Shows Sticky Inflation Is Back” Morningstar, 14 Feb. 2023, https://www.morningstar.com/articles/1137589/january-cpi-report-shows-sticky-inflation-is-back
4. “Consumer prices rise at faster pace in January” Axios, 14 Feb. 2023, https://www.axios.com/2023/02/14/cpi-january-inflation-report-2023
5. “Inflation was still hot in January, but some prices are cooling off” CNN, 14 Feb. 2023, https://www.cnn.com/2023/02/14/economy/cpi-inflation-january/index.html
6. “January inflation hit 6.4%, missing analysts' expectations for a faster slowdown” NBC News, 14 Feb. 2023, https://www.nbcnews.com/business/economy/inflation-rate-january-2023-what-it-means-will-interest-rates-go-up-rcna70401
7. “CPI Inflation Comes In Hot, Keeping Fed On Guard” Investor's Business Daily, 14 Feb. 2023, https://www.investors.com/news/economy/cpi-inflation-comes-in-hot-keeping-fed-on-guard-sp-500
8. “Inflation eased again in January – but there's a cautionary sign” WBUR News, 14 Feb. 2023, https://www.wbur.org/npr/1156542026/inflation-prices-recession-economy-federal-reserve
9. “Inflation rose 0.5% in January, more than expected and up 6.4% from a year ago” CNBC, 14 Feb. 2023, https://www.cnbc.com/2023/02/14/consumer-price-index-january-2023-.html
