Inflation ran hotter in January than had been forecast by economists, signaling that higher prices remain sticky and complicating the Federal Reserve’s decision about when to begin cutting its benchmark rate. As with inflation last month, higher housing and food prices were the big drivers.
Consumer prices rose 3.1% in January from a year earlier, the government said on Tuesday. Economists had expected January prices to rise at a 2.9% pace from a year ago, according to FactSet.
Even so, the pace reflected an improvement from December, when inflation rose at an annual rate of 3.4%.
The January inflation data will help inform the Fed’s rate decision at its March meeting, with Fed Chairman Jerome PowellCBS News’ “60 Minutes” earlier this month that the central bank wants to see more proof that inflation is cooling before cutting rates.
“While January inflation is notoriously volatile, we should continue to see signs of declining inflation, especially on the Fed’s preferred year-over-year comparisons,” said Skanda Amarnath, executive director of Employ America and a former Fed economist.
Fewer than 1 in 5 economists project the Fed will cut rates in March, with the majority penciling in the first cut at its May meeting, according to FactSet.
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