Inflation Slows for Seventh Consecutive Month, But Prices Still Skyrocketing for Certain Items

The January reading of the Consumer Price Index (CPI), a closely watched measure of inflation, rose 6.4% compared to the same month one year ago, according to the United States Department of Labor.^[0] This marked the seventh consecutive month of declining annual inflation since peaking at 9.1% in June, the highest reading since 1981.^[1] The CPI rose 0.5% last month, as prices for food, energy and apparel accelerated at a more rapid pace.^[2] Core inflation, which is the price of all items on the index except for food and energy, went up slightly to 0.4%, compared with 0.3% in December and 5.6% year-over-year.^[3]

The Federal Reserve has already raised interest rates by 4.5 percentage points since last March in an effort to curb inflation and has hinted at two more rate hikes, totaling 0.5 percentage points, in the coming months.^[1] At its last meeting, the Federal Reserve (Fed) increased rates by a smaller-than-expected 25 basis points. However, Fed chair Jerome Powell has cautioned that rates may have to remain elevated for a more extended period, due to data demonstrating a strong labor market.^[4]

The still-rising cost of shelter accounted for nearly half the monthly increase, the Bureau of Labor Statistics said in the report.^[5] Accounting for over a third of the index, the component rose 0.7% month-over-month and was up 7.9% year-over-year.^[6] In December, the Consumer Price Index had an increase of^[6]

Acknowledging that disinflation has commenced, Powell asserted that the Federal Reserve still has a long road ahead to reach its goal of a 2.0% inflation rate. Jerome Powell, Chair of the Central Bank, announced earlier this month that the bank has made headway in controlling prices, beginning a “disinflationary process has begun.”. Last June, inflation reached a 10-year high of 9.1%.^[7]

Although there has been a decrease in price increases, the cost of certain items has dramatically increased over the past year.^[8] In January, the cost of eggs increased by 70% compared to the same time the previous year, while the price of flour rose by 20%.^[9] Food prices, including food away from home, increased 10.1%.^[9]

It is becoming more and more evident to economists that the highest level of inflation has already been reached.^[10] However,

0. “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

1. “Inflation eased again in January – but there's a cautionary sign” NPR, 14 Feb. 2023, https://www.npr.org/2023/02/14/1156542026/inflation-prices-recession-economy-federal-reserve

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. “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

4. “Monthly U.S. inflation accelerates in January, annual figure 6.4% By Investing.com” Investing.com, 14 Feb. 2023, https://www.investing.com/news/economic-indicators/monthly-us-inflation-accelerates-in-january-annual-figure-64-3002904

5. “US inflation eases again for seventh consecutive month” The Guardian, 14 Feb. 2023, https://www.theguardian.com/business/2023/feb/14/us-inflation-eases-seventh-consecutive-month

6. “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

7. “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

8. “Inflation continued to cool in January – ABC7 San Francisco” KGO-TV, 14 Feb. 2023, https://abc7news.com/inflation-continued-to-cool-in-january/12813485/

9. “Grocery prices remain higher in January, led by eggs and citrus” Yahoo News, 14 Feb. 2023, https://news.yahoo.com/grocery-prices-remain-higher-in-january-led-by-eggs-and-citrus-152442563.html

10. “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