The consumer price index rose by an “unexpectedly” 3.1%, down from the 3.4% that was expected in December but still higher than the 2.9% predicted.
Inflation is up 3.9% from last year, excluding volatile prices for food and energy.
The Federal Reserve Board is very cautious about reducing rates. Here’s why. The Fed learned the hard way that in past battles to combat high prices, cutting interest rates too quickly and too much can cause inflation.
Omair Sharif is the founder of Inflation Insights. He said, “They were right in being patient because this kind of number will cast doubt on whether or not there is a deceleration of inflation.” This is a very spooky figure.
Jerome Powell, Fed chair, wonders whether the inflation numbers that are showing signs of a slowing down are real or just a mirage.
Powell asked at his news conference on Jan. 31, “Does it send us a real signal that we are on a path – a sustainable path – down to 2 percent inflation?” “That’s the issue.”
The Fed targets an inflation rate of two percent. We have a long road ahead before we can see interest rates drop significantly.
CNBC:
The increase in shelter prices, which account for about one-third of the CPI, was largely due to this. BLS reported that the index for this category increased by 0.6% in a month and contributed more than two-thirds of the overall increase. Shelter increased by 6% on a year-to-year basis.
The food prices also increased, by 0.4% over the past month. Energy prices, which were down by 0.9% due to a 3.3% drop in gasoline, helped offset the rise.
Following the announcement, stock market futures fell sharply. Futures linked to the Dow Jones Industrial Average fell more than 250 points, and Treasury yields soared.
Rents rose by 6.1 percent compared to a year ago, and certain measures of housing inflation increased month-to-month. The Times reports. Biden will attempt to convince people that inflation has finally turned a corner, but the Fed doesn’t believe it. The Fed continues to struggle to control inflation in the key sectors of housing, food, and services.
Investors now look forward to the Fed’s first rate cut in June.
This chart illustrates that services accounted for a large part of today’s inflation figures. All three categories saw significant increases in prices, including medical care, auto insurance, and airline tickets. The prices of physical goods have continued to moderate and, in some cases, are even falling.
Gas prices have risen again. The Times reports that AAA has reported the average price of a gallon of unleaded gas at $3.23, which is 8 cents more than it was a week earlier and 16 cents more than it was last month.
