Consumer prices rose 6.4% in January, according to the latest consumer price index (CPI) report released by the Labor Department on Tuesday morning.[0] This marks a slight slowdown from the 6.5% seen in December, but still hotter than the 6.2% economists had predicted.[1] Month-to-month inflation ticked up 0.5%, after dropping in December, indicating that overall inflation is still far from tamed.[2]
The core CPI, which excludes food and fuel prices, rose 0.4% for the month as expected and 5.6% for the year, slightly ahead of expectations.[3] This marks the seventh consecutive month of declining annual inflation after the rate peaked at a whopping 9.1% in June.[4]
The shelter index – comprising of rent and housing costs – has seen a year-on-year rise of 7.9%, with a monthly upturn of 0.7%.[5] Half of January’s inflation rate was attributed to this.[5] Food prices rose 10.1% from January of last year, continuing an annual double-digit increase for nine months in a row, though lower than the peak in August.[6]
Federal Reserve officials have noted progress in the bank’s effort to tame prices – with Fed Chair Jerome Powell declaring earlier this month that the “disinflationary process has begun.”[7] However, Powell and his colleagues are likely to keep raising rates, he said, as wage growth is key to the outlook for service-sector inflation.
Revisions show that inflation is cooling less than previously thought, signaling that the most severe inflation in four decades is gradually dissipating.[8] Prices rose 0.5 between December and January — the fastest one-month gain since October of last year — suggesting that inflation is still far from tamed.[0]
Last week, Federal Reserve Chairman Jerome Powell stated that he intends to maintain interest rates at a higher level until inflation nears the 2% target. Powell wants to raise the interest rates to a large extent, so that borrowing and investing become more expensive, thus decreasing the demand in the economy and lowering prices.[9]
The latest Consumer Price Index report does not significantly alter the Federal Reserve’s policy stance.[10] It appears almost certain that the Federal Reserve (Fed) will raise interest rates by a quarter-point in both March and May, as the Fed chooses to be overly cautious in its monetary policy.[10] An increase in borrowing costs can impede economic growth, leading to higher unemployment and increasing the likelihood of a recession.[11]
0. “Inflation rose 6.4% in January” Fox Business, 13 Feb. 2023, https://www.foxbusiness.com/economy/consumer-prices-inflation-rose-january
1. “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
2. “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
3. “Consumer prices rise at faster pace in January” Axios, 14 Feb. 2023, https://www.axios.com/2023/02/14/cpi-january-inflation-report-2023
4. “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
5. “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
6. “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
7. “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
8. “Grocery Inflation Slows in January, but Remains High” TIME, 14 Feb. 2023, https://time.com/6255258/inflation-grocery-prices-rise
9. “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
10. “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
11. “CPI shows inflation still sticky and slowing grudgingly” MarketWatch, 14 Feb. 2023, https://www.marketwatch.com/story/cpi-shows-u-s-inflation-still-sticky-e08c9671