Inflation rose in January, thereby defying investors’ earlier perceptions that inflation would continue to cool down after already reaching its peak. The U.S. Consumer Price Index (CPI) increased by 0.5% over the past month, government data released on Tuesday revealed. CPI rose by 6.4% on an annual basis.
“Core” CPI, which excludes volatile food and energy components, increased by 5.6% year-over-year, thereby exceeding previous expectations of a 5.5% annual increase. The monthly increase was 0.4%, thus falling directly in line with expectations.
The Bureau of Labor Statistics reported that housing prices persisted to be the dominant factor in the CPI report. These prices alone accounted for nearly half the monthly inflation rise. Federal Reserve Chair Jerome Powell stated that he only expects housing prices to cool around the middle of the year.
“There has been an expectation that [inflation] will go away quickly and painlessly; I don’t think it’s guaranteed that’s the base case,” the Fed Chair explained.
Other household expenses that contributed significantly to the rise include food prices which increased by 0.5% as well as energy prices which rose by 2%.