The Consumer Price Index for All Urban Consumers, known in short as the CPI, rose by 0.5% last month after a 0.1% decline in December. Core month-on-month CPI, which strips out volatile food and energy prices, was up 0.4% in January from a 0.3% growth in December.
“This is on the hot side but not a complete shock with some economists flagging upside risks,” economist Adam Button said in a post on the Forex Live forum.
Button said housing numbers flattened out in January while rent declined, gasoline prices held steady and natural gas prices cratered. “So there's disinflation in the pipeline,” he said, agreeing with a Fed assessment earlier this month that price growth was slowing.
Still, the mixed month-on-month data, especially a 0.7% growth in real weekly earnings that could keep spending high, would likely prompt most economists to ask if the central bank was getting anywhere near to its long-held target on inflation, Button said. “Will that be enough to get inflation back to 2% or will it get stuck at 3-4%?”
The CPI hit a 40-year high in June when it grew at an annual rate of 9.1%, versus the Fed's inflation target of just 2% per annum.
The Fed began with a 25-basis point hike in March, then moved up to a 50-basis point increase in May. After that it executed four back-to-back jumbo-sized hikes of 75 basis points from June through November. Since then, it returned to a more modest 50-basis point increase in December and a 25-basis point hike in February.