January Inflation Slows From December, But Still Above Target Level
Inflation cooled slightly in January from December, according to the Consumer Price Index (CPI) released by the Bureau of Labor Statistics (BLS) on Tuesday. The closely watched measure of inflation rose 6.4% year-over-year, down from 6.5% in December. Core inflation, which strips out volatile food and energy costs, rose 5.6%, the smallest increase since December 2021.
The headline annual CPI inflation rate is expected to have dropped from 6.5% in December to 6.2% last month, and the core reading to dip from 5.7% to 5.4%. Prices rose 0.5% between December and January – the fastest one-month gain since October of last year.
The Bureau of Labor Statistics (BLS) reported that, of all factors, housing prices had “by far the largest contributor” on the monthly increase in overall inflation. January’s shelter index rose by 7.9% compared to the same month in the previous year. Food prices, including food away from home, increased 10.1%. The prices of used cars have acted as an inflation-inhibitor, decreasing 8.8% in the past year and 1.9% in January.
Since March of last year, the Federal Reserve has increased interest rates by 4.5 percent in an attempt to control inflation. Fed Chair Jerome Powell has warned that rates may need to stay higher for longer given data showing resilient labor market strength. Powell noted the possibility of further interest rate increases if inflation surpasses the annual rate of 2% in the long term.
It is becoming more and more accepted by economists that the highest point of inflation has already been reached. Despite the 6.4% reading, the Federal Reserve still seeks to maintain a 2% inflation rate, consistent with its goal of stable prices and a low rate of unemployment. Powell and his colleagues implemented another 0.25 percentage point increase at their last meeting and said “ongoing increases” in the Fed’s benchmark interest rate were still necessary to ensure that inflation returns to its target level of 2%. The January CPI report shows that inflation is still higher than the Federal Reserve's target, and the rate at which it is decreasing has slowed drastically.
0. “Annual Inflation Cooled Slightly in January as Pace of Moderation Levels Off” The Wall Street Journal, 14 Feb. 2023, https://www.wsj.com/articles/us-inflation-january-2023-consumer-price-index-f080e30b
1. “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/
2. “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
3. “January inflation comes in higher than expected” WAVY.com, 14 Feb. 2023, https://www.wavy.com/news/national/annual-inflation-rose-6-4-percent-in-january-cpi/
4. “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
5. “Inflation eased again in January – but there's a cautionary sign” MPR News, 14 Feb. 2023, https://www.mprnews.org/story/2023/02/14/npr-inflation-prices-recession-economy-federal-reserve
6. “Consumer prices rise at faster pace in January” Axios, 14 Feb. 2023, https://www.axios.com/2023/02/14/cpi-january-inflation-report-2023
7. “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
8. “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
9. “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
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