Consumer Prices Rise 6.4% in January, Shelter Costs Reach Record High
Consumer prices rose 6.4% in January compared to the same time last year, cooling slightly from the 6.5% rate in December. The month-to-month inflation rate was also up 0.5%, according to the latest Consumer Price Index (CPI) report released Tuesday morning. Core CPI, which excludes food and fuel prices, rose 0.4% for the month and 5.6% year over year.
The disinflationary process has begun, Federal Reserve Chair Jerome Powell said earlier this month, as the annual inflation rate peaked at 9.1% in June. But the CPI report shows the central bank still has work to do, as the inflation rate still remains far above the Fed’s 2% target.
Food prices, including food away from home, were particularly hot in January, increasing 10.1% over the last year. Some of the food categories that posted elevated levels of inflation include breakfast cereal (+15.0% Y/Y), bakery products (+15.4%), milk (+11.0), carbonated drinks (+14.3%), margarine (+44%), and bread (+14.9%). Prices for meat were up only 2.2% year-over-year, with beef and veal prices actually dropping.
The expense of shelter, encompassing rent and owning a home, rose by 7.9%. The speed of this rate is the fastest it has been since 1982. Rent prices have hit another new high, rising 8%. Rising shelter costs accounted for about half the monthly increase.
In an effort to curb rising costs, the Federal Reserve has upped borrowing rates from near-zero to a target range of 4.5% to 4.75% in less than a year. At the last policy meeting, Fed chair Jerome Powell announced a smaller 25-basis-point rate increase, yet he cautioned that rates may have to remain at a higher level for a longer period, due to data indicating a robust labor market.
Revisions to the CPI data show that inflation is cooling less than previously thought. The Federal Reserve's policy outlook remains unchanged despite the recent Consumer Price Index report. The Federal Reserve appears poised to raise its interest rate by a quarter point in both March and May, seemingly erring on the side of making monetary policy too restrictive.
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1. “Inflation is higher than expected at 6.4%, with the ‘most important' measure remaining elevated” CNBC, 14 Feb. 2023, https://www.cnbc.com/2023/02/14/inflation-higher-than-expected-in-january.html
2. “Consumer prices rise at faster pace in January” Axios, 14 Feb. 2023, https://www.axios.com/2023/02/14/cpi-january-inflation-report-2023
3. “US CPI climbed 6.4% in January as inflation is still high” Business Insider, 14 Feb. 2023, https://www.businessinsider.com/how-high-is-inflation-cpi-report-january-price-growth-2023-2
4. “Inflation rose 6.4% in January” Fox Business, 13 Feb. 2023, https://www.foxbusiness.com/economy/consumer-prices-inflation-rose-january
5. “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
6. “Food inflation is still running double digits – watch these stocks for pricing power” Seeking Alpha, 14 Feb. 2023, https://seekingalpha.com/news/3935716-food-inflation-is-still-running-in-the-double-digits-watch-these-stocks-for-pricing-power
7. “Inflation ticks down to 6.4% even as January prices climbed” MLive.com, 14 Feb. 2023, https://www.mlive.com/public-interest/2023/02/inflation-ticks-down-to-64-even-as-january-prices-climbed.html
8. “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
9. “U.S. inflation slowed slightly in January – Labor Department By Investing.com” Investing.com, 14 Feb. 2023, https://www.investing.com/news/economic-indicators/us-inflation-slowed-slightly-in-january–labor-department-3002904
10. “CPI Report Today Live: Inflation Cooled to 6.4% in January” The Wall Street Journal, 14 Feb. 2023, https://www.wsj.com/livecoverage/cpi-report-today-january-2023-inflation
11. “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
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