Inflation rose more than expected in January as high home prices continued to weigh on consumers, according to a Labor Department report on Tuesday.
The consumer price index, a broader measure of the prices of goods and services faced by buyers across the economy, rose 0.3% for the month, according to the Bureau of Labor Statistics. Over 12 months, that became 3.1%.
Economists polled by Dow Jones had expected a monthly increase of 0.2% and an annual increase of 2.9%.
Excluding volatile food and energy prices, the core CPI rose 0.4% in January and rose 3.9% from a year ago. Economists on the other hand predicted 0.3% and 3.7% respectively.
House prices, which account for about a third of the CPI data also accounted for the bulk of the increase. The index for that category rose 0.6% in the month, accounting for more than two-thirds of the primary increase, the BLS reported. Within 12 months, the price of housing increased by 6%.
Food prices also increased, by 0.4% in the month. Energy prices helped offset some of the increase, falling by 0.9% mainly due to a 3.3% drop in petrol prices. Stock market futures declined significantly after the CPI data was released. Futures linked to the Dow Jones Industrial Average were lower by more than 250 points and national bond yields rose.
The data was released as Federal Reserve officials try to set the right balance for monetary policy in 2024. Although financial markets have been looking for aggressive interest rate cuts, policymakers are currently more cautious in their statements. This is because they want to focus on data needs and developments.
Fed officials expect inflation to return to the 2% annual target as they believe home prices will slow throughout the year. This increase in January could be a problem for central banks looking to release the brakes on monetary policy.
