CPI Report: US Prices Rise More Than Expected In January

U.S. consumer prices rose significantly higher than expected in January, according to data released Tuesday morning from the Bureau of Labor Statistics.

The Consumer Price Index (CPI) in January rose 0.3% over the previous month and 3.1% over the previous year.

This is slightly higher than December’s 0.2% increase but a decrease from December’s 3.4% annual gain.

Economists had forecasted a 0.2% month-over-month increase and a 2.9% annual increase.

When food and energy prices are taken out, inflation actually rose 3.9% compared to last year.

Nearly all basic categories for consumers increased at a faster pace or stayed firm in January. Categories that increased include grocery prices, dining out, electricity bills, car insurance prices, shelter prices and daycare and tuition prices.

Shelter prices contributed to more than two-thirds of the overall increase, with the shelter index increasing 6.0% over the last year.

Notable increases over the last year also include motor vehicle insurance (+20.6%), personal care (+5.3%) and recreation (+2.8%).

These price increases have likely delayed any Federal Reserve interest-rate cuts, writes Bloomberg’s Augusta Saraiva: “The figures further reduce already-slim chances that Fed officials will start lowering interest rates soon, and any additional reacceleration might reignite talks that they will resume hikes. Some policymakers have said they want to see a broader easing of price pressures before cutting rates.”

Kathy Jones, Charles Schwab’s chief fixed-income strategist, says, “The Fed will view this as another reason to wait until May or June, but the direction of trend is still lower. With much of the increase due to housing, it’s a waiting game to see when those costs will come down.”

Following the release from the Bureau of Labor Statistics, the S&P 500 fell and the Treasury yields increased.

The report did include some favorable news. Prices of used cars decreased on a monthly basis by the most since 1969. The overall energy index decreased 0.9%, with gasoline and fuel oil decreasing by 3.3% and 4.5%, respectively.