Consumer prices rose at a faster-than-expected pace at the start of the year, according to data released Wednesday by the Labor Department. The consumer price index climbed 0.5% from December to January, contributing to a 3.0% rise over the past year. The results ran hotter than economists’ expectations for 0.3% monthly and 2.9% annual increases.
The price hikes were widespread and include a big jump in the cost of eggs, which rose 15.2% from December and 53% from a year ago, driven by an intensifying outbreak of avian flu. The surge in egg prices helped push grocery prices 0.5% higher, the largest monthly increase in that category in more than two years.
The core price index, which strips out volatile food and fuel prices to give a better sense of the underlying trend, rose 0.4% on a monthly basis in January, the largest monthly increase in nearly two years. On an annual basis, core prices were up 3.3%.
Core prices were driven in part by an increase in the cost of shelter, including home insurance and lodging, which rose 0.4% from December. The long-term trend for shelter is cooling, though, easing to a 4.4% increase over the last year, matching a three-year low.
Powell says more work to do: Federal Reserve Chair Jerome Powell, appearing before a House committee Wednesday to provide his semi-annual update, told lawmakers that the Fed still has its work cut out for it.
“I would say we’re close, but not there on inflation,” Powell told the House Financial Services Committee. “Last year, inflation was 2.6% — so great progress — but we’re not quite there yet.”
Powell added that the recent data bolsters the Fed’s current stance on interest rates. “We want to keep policy restrictive for now,” he said.
Powell also cautioned against reaching any major conclusions from a few data points. “We don’t get excited about one or two good readings, and we don’t get excited about one or two bad readings,” he said.
Trump casts blame: President Donald Trump blamed the hotter-than-expected numbers on his predecessor, writing “BIDEN INFLATION UP!” on his social media network. He also called for a cut in interest rates, ramping up pressure on the Fed, though without naming the central bank or its leader explicitly.
“Interest Rates should be lowered, something which would go hand in hand with upcoming Tariffs,” Trump wrote. “Lets Rock and Roll, America!!!”
National Economic Council Director Kevin Hassett said the president’s comments were directed more at his own administration than the Fed. “We’re taking aggressive actions to lower interest rates,” Hassett said, citing spending cuts, tax cuts and deregulation. Some economists have questioned the efficacy of those strategies, noting that tax cuts and Trump-favored tariffs could push prices higher.
What the experts are saying: Analysts generally had little good to say about the January inflation numbers.
“The long national nightmare of inflation isn’t over yet for consumers, businesses, and investors,” Chris Rupkey, chief economist at FwdBonds, said Wednesday, per CNN. “There could be some seasonality that pushes prices up at a faster clip in January, but today the news for [Federal Reserve] officials is all bad.”
Paul Ashworth, chief North America economist at Capital Economics, said progress against inflation seems to have stalled. “Inflation has now been around these rates for some time and clearly isn’t coming down decisively any more,” he said, per The Wall Street Journal.
Moody’s chief economist Mark Zandi, who has been relatively dovish on inflation in recent months, noted that inflation tends to pick up in January, when businesses raise prices at the start of the new year. Still, “the disinflation (slowing in inflation) we’ve enjoyed since summer 2022 is over,” he wrote. “It is too early to fire off red flares on inflation, but a yellow flare is apropos.”