Monthly consumer prices rose 0.5% in January after ticking up 0.1% in December, according to the latest data from the Bureau of Labor Statistics. The annual rate of consumer inflation barely slowed to 6.4%, down from December’s 6.5%.
The results were in line with economists’ expectations of a 0.5% rise for the month and close to predictions of a 6.2% increase on the year.
Energy prices, which have declined in five of the last six months, rose 2% in January, up 8.7% for the year.
Meanwhile, food rose 0.5% for the month and has risen 10.1% year over year. Shelter costs also ticked up 0.7% in January, up 7.9% from a year ago.
Used vehicles were down 1.9% for the month of January and have fallen 11.6% on the year. The BLS also noted downward pressure from medical care services, down 0.7% on the month.
To fight inflation becoming entrenched, the Federal Reserve has hiked its overnight lending rate eight times starting in March 2022 to further restrict the money supply in the U.S. Following December’s report, the Fed opted for a 25-basis-point hike on Feb. 1, the first “normal-sized” rise in the rate since that first hike in March. It marked the second straight month of slowing the pace of rate hikes after four straight meetings where the Fed raised its rate by 75 basis points.
But two days after the Fed’s last minute, the January jobs report came out much stronger than anticipated. Unemployment dropped to 3.4%, its lowest point since 1969, while the U.S. added 517,000 jobs. Economists had expected the country would add fewer than 190,000 jobs.
While the robust report fueled talks of the Fed being able to stick a soft landing — where it brings down inflation without triggering a recession — it also led to speculation that the Fed may need to raise interest rates higher than it previously planned. The latest projections from the open market committee suggest the rate will need to go just above 5% and then hold there while inflation comes down. The federal funds rate currently sits between the target range of 4.5% to 4.75%.
