US inflation slows but remains elevated in sign that price pressures are easing only gradually
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Consumer inflation in the United States cooled last month yet remained elevated in the latest sign that the pandemic-fueled price surge is only gradually and fitfully coming under control. The consumer price index rose 0.3% from December to January, up from a 0.2% increase the previous month. Compared with a year ago, prices are up 3.1%. The latest reading is still well above the Federal Reserve’s 2% target level. Excluding volatile food and energy costs, core prices climbed 0.4% last month, up from 0.3% in December. On a year-over-year basis, core prices were up 3.9% in January. The drivers of inflation have shifted from goods to services. Fed Chair Jerome Powell singled out persistently high services prices as a concern. The unexpectedly sticky inflation data sent stock and bond prices tumbling. Biden administration officials noted that average hourly pay, adjusted for inflation, rose in January and is 1.4% higher than it was a year earlier. However, the average work week has declined, leaving weekly inflation-adjusted pay slightly lower than it was a year earlier. Economists caution against assigning too much weight to January’s inflation data, noting that many companies impose annual price increases in the first month of the year. Forward-looking data suggests that inflation will continue to cool. The pace of wage growth has slowed, and consumers and business owners expect lower inflation in the coming months and years. Grocery prices rose 0.4% from December to January, the biggest such rise in a year, though compared with 12 months earlier, food prices are up just 1.2%. The costs of services, including auto insurance, apartment rents, and concert tickets, are still rising faster than they did before the pandemic and keeping overall inflation persistently high. The cost of car insurance has soared more than 20% compared with a year ago. Housing costs, particularly the price of home ownership, rose 0.6% from December to January, the biggest one-month jump since April. The Fed raised its key rate 11 times from March 2022 to July of last year in a drive to defeat high inflation. Most economists still think the Fed will start cutting its rate in June from its 22-year-high of roughly 5.4%.

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https://apnews.com/article/inflation-prices-rates-economy-biden-federal-reserve-539b662f32a3cea4a514407ae4389174