Inflation Rises 3% in January, Exceeding Predicted 2.9% Rate

U.S. inflation rose to 3 percent in January, strengthening the case for the Federal Reserve to extend a pause on interest rate cuts. The Consumer Price Index jumped more than expected, data from the Bureau of Labor Statistics showed on Wednesday, rising 0.5 percent from December in what was the fastest monthly increase since August 2023. Last month, the annual pace was 2.9 percent. “Core” C.P.I., which more closely reflects underlying inflation by removing volatile food and energy prices, also showed little improvement. It rose 0.4 percent from December or 3.3 percent on a year-over-year basis, both higher than economists expected. The monthly increase in core prices was the highest since April 2023. The January data underscored the uneven nature of the central bank’s battle against high prices. Inflation has subsided drastically since cresting just above 9 percent in 2022, but progress in recent months has been much more sporadic.

U.S. inflation accelerated last month as the cost of groceries, gas, and used cars rose, a trend that will likely underscore the Federal Reserve’s resolve to delay any further interest rate cuts. The consumer price index increased 3% in January from a year ago, Wednesday’s report from the Labor Department showed, up from 2.9% the previous month. It has increased from a 3 1/2 year low of 2.4% in September. The figures show that after inflation steadily declined in 2023 and for much of last year, it has remained stubbornly above the Fed’s 2% target for roughly the past six months. Elevated prices created a major political problem for former President Joe Biden. President Donald Trump pledged to reduce prices in last year’s campaign, though most economists worry that his many proposed tariffs could at least temporarily increase costs.

Inflation ticked higher in January as stubbornly high prices continued to strain Americans' household finances as the Federal Reserve weighs a continued pause to its interest rate cut plans. The Labor Department on Wednesday said that the consumer price index – a broad measure of how much everyday goods like gasoline, groceries and rent cost – increased 0.5% in January while it rose to 3% on an annual basis. The annual figure is the highest since June 2024. Both the annual and headline CPI figures were hotter than the estimates of economists polled by LSEG, who had predicted inflation rose 0.3% on a monthly basis and 2.9% from a year ago, and came in higher than last month's readings of 0.4% and 2.9%, respectively.