U.S. CPI Moderates in January, Core Inflation Remains High
By The U.S. Consumer Price Index inflation rate moderated in January, yet remained higher than many economists had expected, driven by rising prices for housing, gasoline and natural gas.[0] According to the report from the Labor Department on Tuesday, the CPI rose 6.4% from a year earlier, down from 6.5% in December and the lowest annual inflation reading since October 2021.[1] The monthly increase was 0.5%, the fastest one-month gain since October of last year.[2]
Core inflation, which strips out volatile food and energy prices, was at 5.6% in the year ending in January.[3] Prices for used cars, medical care and airplane tickets all fell month-to-month, however, used car prices have acted as a brake on inflation, falling 8.8% last year and another 1.9% in January.[4]
The Federal Reserve has aggressively raised borrowing costs from near-zero to a target range of between 4.5% to 4.75% in less than a year, as the U.S. central bank aims to bring down soaring prices.[5] At its last policy meeting, the Federal Reserve (Fed), chaired by Jerome Powell, only raised interest rates by a smaller-than-expected 25 basis points. However, Powell has cautioned that rates may have to remain elevated for a longer period due to data indicating that the labor market remains strong.[5]
In January 2021, India’s retail inflation rate rose to 6.52%, following two consecutive months below the 6% mark, due to a surge in consumer food prices that rose to 5.94% from 4.2% in December 2022. Additionally, prices of goods and services across the board also experienced an uptick.[6]
According to the New York Fed's January 2023 Survey of Consumer Expectations, the median forecast for inflation over the next twelve months remained stable at 5%.[7] Americans anticipate inflation to be 2.7% in three years and 2.5% in five years, representing a decrease of 0.3 percentage points and an increase of 0.1 percentage points, respectively.[7]
The Fed views the core rate as a more accurate predictor of future inflation trends and it’s one of the most important numbers for the Fed now.[5] If inflation gets stuck well above the Fed’s 2% target, say 4% to 5%, the bank could raise rates even higher than planned and keep them high for a while.[8] When borrowing costs increase, the economy slows down, unemployment increases, and the possibility of a recession grows.[8]
The cost of groceries increased at a more moderate rate of 0.[9]
0. “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
1. “Stock futures are flat after January inflation shows 6.4% annual increase: Live updates” CNBC, 14 Feb. 2023, https://www.cnbc.com/2023/02/13/stock-market-today-live-updates.html
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. “Inflation fell to 6.4% in January, hotter than expected” Washington Examiner, 14 Feb. 2023, https://www.washingtonexaminer.com/policy/economy/inflation-fell-to-6-4-in-january-hotter-than-expected
4. “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
5. “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
6. “Retail inflation rises to 3-month high of 6.52% in January” The Hindu, 13 Feb. 2023, https://www.thehindu.com/business/Economy/retail-inflation-rises-to-3-month-high-of-652-in-january/article66504378.ece
7. “Live updates: Stocks rise as annual inflation keeps falling” CNN, 14 Feb. 2023, https://www.cnn.com/business/live-news/stock-market-news-inflation/index.html
8. “CPI shows U.S. inflation still sticky” MarketWatch, 14 Feb. 2023, https://www.marketwatch.com/story/cpi-shows-u-s-inflation-still-sticky-e08c9671
9. “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
