The Federal Reserve’s preferred inflation gauge rose last month at its fastest pace since June, an alarming sign that price pressures remain entrenched in the U.S. economy and could lead the Fed to keep raising interest rates well into this year.
Friday’s report from the Commerce Department showed that consumer prices rose 0.6% from December to January, up sharply from a 0.2% increase from November to December. On a year-over-year basis, prices rose 5.4%, up from a 5.3% annual increase in December.
Excluding volatile food and energy prices, so-called core inflation rose 0.6% from December, up from a 0.4% rise the previous month. And compared with a year earlier, core inflation was up 4.7% in January, versus a 4.6% year-over-year uptick in December.
The report also showed that consumer spending rose 1.8% last month from December after falling the previous month.
January’s price data exceeded forecasters’ expectations, confounding hopes that inflation was steadily decelerating and that the Fed could relent on its campaign of rate hikes. It follows other recent data that also suggested that the economy remains gripped by inflation despite the Fed’s strenuous efforts to tame it.
Last week, the government issued a separate inflation measure — the consumer price index — which showed that prices surged 0.5% from December to January, much more than the previous month’s 0.1% rise. Measured year over year, consumer prices climbed 6.4% in January. That was well below a recent peak of 9.1% in June but still far above the Fed’s 2% inflation target.
Since March of last year, the Fed has attacked inflation by raising its key interest rate eight times. Yet despite the resulting higher borrowing costs for individuals and businesses, the job market remains surprisingly robust. That is actually a worrisome sign for the Fed because strong demand for workers tends to fuel wage growth and overall inflation. Employers added a sizzling 517,000 jobs in January, and the unemployment rate fell to 3.4%, its lowest point since 1969. PAUL WISEMAN, WASHINGTON, MDT/AP
