US Inflation Stays Elevated, Adding Pressure for More Fed Hikes


US consumer prices rose briskly at the start of the year, a sign of persistent inflationary pressures that could push the Federal Reserve to raise interest rates even higher than previously expected.

The overall consumer price index climbed 0.5% in January, the most in three months and bolstered by energy and shelter costs, according to data out Tuesday from the Bureau of Labor Statistics. The measure was up 6.4% from a year earlier.

Advance in US Consumer Prices Points to Persistent Inflation | Overall CPI rises most in three months, boosted by firm shelter costs

Excluding food and energy, the so-called core CPI advanced 0.4% last month and was up 5.6% from a year earlier. Economists see the gauge as a better indicator of underlying inflation than the headline measure. 

The median estimates in a Bloomberg survey of economists called for a 0.5% monthly advance in the CPI and a 0.4% gain in the core measure. Both annual measures came in higher than expected.

Follow the reaction in real-time here on Bloomberg’s TOPLive blog

US stock futures erased gains and Treasury yields rose after the report.

The figures, when paired with January’s blowout jobs report and signs of enduring consumer resilience, underscore the durability of the economy — and price pressures — despite aggressive Fed policy. The data support officials’ recent assertions that they need to hike rates further and keep them elevated for some time, and possibly to a higher peak level than previously expected.

The path to stable prices will likely be both long and bumpy. The goods disinflation that has driven the slide in overall inflation in recent months appears to be losing steam, and the strength of the labor market continues to pose upside risks to wage growth and service prices.

The details of the report showed shelter was “by far” the largest contributor to the monthly advance, accounting for almost half of the rise. Used car prices — a key driver of disinflation in recent months — fell for a seventh month. Energy prices rose for the first time in three months.

Shelter costs, which are the biggest services component and make up about a third of the overall CPI index, rose 0.7% last month. Owners’ equivalent rent and rent of primary residence increased by the same amount, while hotel stays also climbed.

Because of the way the housing metrics are calculated, there’s a significant lag between real-time price changes and the government statistics.

The January report incorporated new weights for the consumer basket to try to more accurately capture Americans’ spending habits. The shelter components are now a larger share of the overall index while used cars make up a smaller portion.

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