Although the Federal Reserve has made moves to tame inflation, the consumer price index continued to increase at a rate of 6.4% annually in January.
This is a slight decrease from the 6.5% annual rate reported last month, but that is still far above the Fed’s target inflation growth of 2%.
Additionally, prices rose 0.5% monthly from December to January, an increase from the 0.1% increase from November to December.
Core CPI, which includes all prices for goods except food and energy, rose 5.6% annually, but showed a monthly increase of 0.4%. As food and energy prices can be volatile, the core CPI measures the price fluctuation in goods that wouldn’t typically be affected by forces outside traditional supply and demand.
January's price increases were largely fueled by pricier energy, housing, and food. Natural gas prices rose by 26.7% annually, while electricity costs rose by 15.6% over the same period.
Over the past year, housing costs have increased by almost 8% and transportation services by more than 14%. Food costs have soared about 10% annually, with greater increases in grocery bills leading the price hikes.
While this most recent inflation increase is a far cry from the four-decade high of 9.1% in June, it is likely to spur more interest rate hikes from the Federal Reserve.
The central bank raised rates by 0.25 percentage points in January to a range of 4.5% to 4.75%, the highest level since late 2007. This was the seventh consecutive rate hike in the Fed’s efforts to subdue inflation.
Fed Chair Jerome Powell had already signaled last month that rates would continue to increase, but this latest inflation report may influence the rate by which it is raised and the duration of the elevated rates.
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