In January, inflation exceeded expectations due to increased grocery and housing costs, with the consumer price index rising by 0.3% from the previous month and 3.1% from the previous year.
Core prices, excluding food and energy, also rose by 0.4% monthly and 3.9% annually.
“Overall inflation continues to grind lower, but the drop in core inflation virtually ground to a halt last month, mainly because of shelter prices,” corporate economist Robert Frick said. “Other service costs remain stubbornly strong, while the food price increases are particularly painful. Breaking the 3% level is proving tougher than expected.”
Despite a decrease from its peak, inflation remains above the Federal Reserve’s 2% target, leading to financial strain, particularly for low-income households.
Housing costs, including rent, were the primary driver of inflation, with rent costs rising by 0.6% for the month and 6.1% annually.
“The final mile towards the Fed’s 2% target was always going to be slow, erratic, and frustrating,” Principal Asset Management chief global strategist Seema Shah said.
“What today’s report does emphasize, however, is that without a cooling of the labor market and economy, inflation progress is likely to come to a halt. A March cut is completely off the agenda, but May could still be in play if economic activity plays ball and finally starts to show the impact from prior Fed tightening.”
Other factors contributing to inflation included food, grocery, health insurance, and auto insurance price increases.
The report’s findings disappointed investors, causing stock futures to drop, and suggest that inflation progress may stall without a cooling of the labor market and economy.
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