Consumer Prices Rise 6.4% in January, Shelter Costs Reach Record High
By Consumer prices rose 6.4% in January compared to the same time last year, cooling slightly from the 6.5% rate in December.[0] The month-to-month inflation rate was also up 0.5%, according to the latest Consumer Price Index (CPI) report released Tuesday morning.[1] Core CPI, which excludes food and fuel prices, rose 0.4% for the month and 5.6% year over year.[2]
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.[3] 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.[4]
Food prices, including food away from home, were particularly hot in January, increasing 10.1% over the last year.[5] 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%).[6] Prices for meat were up only 2.2% year-over-year, with beef and veal prices actually dropping.[6]
The expense of shelter, encompassing rent and owning a home, rose by 7.9%.[7] The speed of this rate is the fastest it has been since 1982.[5] Rent prices have hit another new high, rising 8%.[5] Rising shelter costs accounted for about half the monthly increase.[8]
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.[9] 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.[1]
Revisions to the CPI data show that inflation is cooling less than previously thought.[10] The Federal Reserve's policy outlook remains unchanged despite the recent Consumer Price Index report.[11] 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.[11]
0. “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
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
