On Tuesday, the Labor Department reported that the Consumer Price Index (CPI) – a closely watched measure of inflation which tracks fluctuations in the costs of everyday goods and services – rose 6.4% compared to the same month one year ago.[0] The January reading marked the seventh straight month of cooling in annual inflation since peaking at 9.1% in June, the highest reading since 1981.[1] Core inflation, which excludes volatile food and energy costs, increased at an annual rate of 5.6%.[2] Annually, both overall and core inflation rose at their lowest rate since the fourth quarter of 2021.[0]
The US Federal Reserve (Fed) 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 central bank aims to bring down soaring prices.[3] At its last policy meeting, the Fed revealed a minor 25-basis-point rate increase. Nevertheless, Fed chair Jerome Powell cautioned that rates could need to remain higher for an extended period of time due to data exhibiting a strong labor market.[3]
[4] Inflation rose by 0.5% month-to-month, ending a three-month period of improvement after the December reading revealed the most significant decrease since April 2020, when the pandemic was at its most disconcerting.[5]
Meanwhile, India’s retail inflation shot back up to 6.52% in January after a two-month streak below the 6% mark, with consumer food prices hardening again to 5.94% from 4.2% in December 2022. In January, the retail sector in the country experienced an inflation rate of 6.52%, the highest since October 2022 (6.77%).
The January 2023 Survey of Consumer Expectations conducted by the New York Federal Reserve revealed that the median expected inflation rate for the next twelve months remained at 5%.[6] In three years, Americans anticipate that inflation will be 2.7%, which is 0.3 percentage points lower than today. Five years into the future, inflation is expected to be 2.5%, a 0.1 percentage point increase.[6]
The Federal Reserve considers the core rate to be a better indication of future inflation movements.[7] According to the Bureau of Labor Statistics report, rising shelter costs constituted approximately half of the rise in monthly costs.[8] [7]
0. “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/
1. “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
2. “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
3. “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
4. “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
5. “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
6. “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
7. “CPI shows U.S. inflation still sticky” MarketWatch, 14 Feb. 2023, https://www.marketwatch.com/story/cpi-shows-u-s-inflation-still-sticky-e08c9671
8. “Consumer price index January 2023:” CNBC, 14 Feb. 2023, https://www.cnbc.com/2023/02/14/consumer-price-index-january-2023-.html