The latest report from the Bureau of Labor Statistics (BLS) revealed that the Consumer Price Index (CPI) rose 3.0% from a year earlier, slightly higher than the 2.9% annual increase in December.
On a monthly basis, the index rose 0.5% from December, higher than economists’ expectations of a 0.3% increase.
Several seasonal factors such as higher fuel costs and persistent food inflation have kept inflation at a high level. Egg prices rose 15.2%, the largest increase since June 2015, accounting for about two-thirds of the increase in household food costs in January.
Looking at the core CPI, which excludes changes in the more volatile food and energy prices – prices rose 0.4% on a monthly basis, higher than the 0.2% increase in December. On an annual basis, the core CPI rose 3.3% from a year ago, up slightly from 3.2% in December.
This is the first time since July last year that the core inflation rate has rebounded after a downward trend in the previous few months.
While inflation has shown signs of slowing over the long term, it remains above the Federal Reserve’s 2% target. Some economists and Fed officials have warned that the journey to that target will be “windy and uncertain.”
The re-election of Donald Trump as US President has added uncertainty to the direction of the economy, with some economists warning that the US could face a new wave of inflation if Trump continues with more protectionist trade policies.
Trump’s latest moves include:
A 25% tariff on steel and aluminium imports, effective March 12
A 25% tariff on Mexico and Canada, set to begin next month
A 10% tariff on Chinese goods, already in effect
The policy has the potential to raise the cost of imported goods, which could ultimately complicate the Federal Reserve’s efforts to set the right interest rate to control inflation.
