Inflation: Consumer prices rose 3.1% in January, defying expectations of accelerating economic slowdown

U.S. consumer prices rose more than expected in January, Census Bureau says The latest data Data from the Bureau of Labor Statistics released Tuesday morning.

In January, the consumer price index (CPI) increased by 0.3% from the previous month and 3.1% from the previous month. The increase from the previous month was slightly higher than the 0.2% increase in December, but the increase rebounded from the previous month. A slowdown from December’s 3.4% annual growth rate.

Both measures were above economists’ forecasts of 0.2% month-on-month growth and 2.9% annual growth, according to Bloomberg data.

On a “core” basis, excluding volatile food and natural gas costs, prices in January rose 0.4% from the previous month and 3.9% from the same period last year.

Investors are closely watching for clues on when the Federal Reserve will start cutting interest rates.After the data is released, market pricing 94% The central bank is likely to keep interest rates unchanged at next month’s meeting, up from 84% on Monday.

read more: What the Fed’s rate decision means for bank accounts, certificates of deposit, loans and credit cards

stock move down In early trading after the report was released, the 10-year Treasury yield rose about 10 basis points to nearly 4.3%.

“It’s too early to declare victory over inflation. Maybe the last mile is indeed more difficult,” wrote Torsten Sløk, partner and chief economist at Apollo, the parent company of Yahoo Finance.

Home and food prices remain firm as gas prices fall

Notable elements of the inflation data included the housing index, which rose 6% on an unadjusted annual basis and 0.6% month-on-month. This was a particularly high gain following the index’s monthly gain of 0.4% in December.

Economists said the rise in core inflation was largely due to sticky housing inflation.

The rent index and landlord equivalent rent index increased by 0.4% and 0.6% month-on-month respectively. Owner equivalent rent is the hypothetical rent a homeowner would pay for the same property.

Other indexes that rose in January included motor vehicle insurance and health care, while the used cars and trucks index and the apparel index declined in January, the Bureau of Labor Statistics noted.

Used car prices have been falling steadily since October, falling 3.4% from December to January and down 3.5% annually.

The food index increased by 2.6% in January compared with the same period last year Food prices rose 0.4% From December to January, the domestic food index increased by 0.4% quarterly, while it only rose by 0.1% in December.

Food delivery rose 0.5% month-on-month, following a 0.3% rise in December.

On the other hand, energy prices continued to fall, with an annual decrease of 4.6% and a quarterly decrease of 0.9%.

Fuel oil prices led the decline, with prices falling 4.5% from December to January; natural gas prices fell 3.3% quarter-to-quarter, falling only 0.6% in December.

To hike or not to hike?

Annual inflation remains above the Fed’s 2% target.But the Fed’s preferred inflation gauge, the core personal consumption expenditures (PCE) price index, has emerged. below this ratio On a six-month annualized basis, that boosted hopes the central bank might start cutting interest rates.

However, Tuesday’s report will temper those expectations.

“For those betting that the Fed will start cutting interest rates soon,” Raymond James chief economist Eugenio Alemán wrote in response to the report that beat expectations. This is a terrible report for people.”

Federal Reserve Chairman Jerome Powell speaks at a press conference on the Federal Reserve's monetary policy in Washington, Wednesday, January 31, 2024.  (AP Photo/Alex Brandon)

Federal Reserve Chairman Jerome Powell speaks at a press conference on the Federal Reserve’s monetary policy in Washington, Wednesday, January 31, 2024. (AP Photo/Alex Brandon) (Associated Press)

Ellen Zentner, chief U.S. economist at Morgan Stanley, added: “The acceleration in core PCE growth is consistent with our view of a rocky road ahead. We believe first-quarter 2024 sequential numbers will generally be higher than what we expect in 2024.” levels seen in 2018.” over the past 6 months. This acceleration will be a factor in delaying the decision to start cutting interest rates until June this year. “

Citigroup, on the other hand, warned that the red-hot inflation report could have an impact on the recent stock market rebound.

Stuart Kaiser, Citi’s head of U.S. equity trading strategy, wrote: “Strong core CPI is not a game changer, but may drive a short-term correction. Against the backdrop of strong growth data, it will be difficult for the Fed to continue its policy despite very Strict but an early cut as some investors want and raises concerns about overheating.”

“We should see a pullback, maybe in the 2-4% range, but that’s somewhat limited by the fact that the economy is still pretty strong,” he continued.

alexandra canal is a senior reporter at Yahoo Finance.Follow her on Twitter @allie_canal, LinkedIn, and email her at

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