Inflation gauge ticks up 0.3% - Orange County Register

FEDERAL RESERVE

Inflation gauge ticks up 0.3%

Report indicates prices paring from a year ago in a sign that rates are continuing to cool

A woman shops at a Kohl’s store in Clifton, N.J., on Jan. 26. The Commerce Department in its January report on consumer spending released Thursday says prices rose 0.3% from December. SETH WENIG — THE ASSOCIATED PRESS

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By Christopher Rugaber

The Associated Press

An inflation gauge favored by the Federal Reserve increased in January, the latest sign that the slowdown in U.S. consumer price increases is occurring unevenly from month to month.

The government reported Thursday that prices rose 0.3% from December to January, up from 0.1% in the previous month. But in a more encouraging sign, prices were up just 2.4% from a year earlier, down from a 2.6% annual pace in December and the smallest such increase in nearly three years.

The year-over-year cooldown in inflation is sure to be welcomed by the White House as President Joe Biden seeks reelection. Still, many Americans remain frustrated that overall prices still are well above where they were before inflation erupted three years ago.

January’s month-to-month price increase likely will underscore the concern expressed recently by Federal Reserve officials about the risk of cutting interest rates too soon this year. Minutes from the Fed’s most recent meeting in January showed that most of the policymakers were wary of reducing rates prematurely, before inflation had sustainably returned to the Fed’s 2% target.

Thursday’s figures “very much explain why they were right to be cautious,” Omair Sharif, founder of Inflation Insights, a consulting firm, said of Fed officials. “They continue to want to get more confidence.”

Excluding volatile food and energy costs, so-called “core” prices rose 0.4% from December to January, up from 0.1% in the previous month and the biggest increase in a year. And compared with a year earlier, core prices rose 2.8%, barely down from 2.9% in December. Economists consider core prices a better gauge of the likely path of future inflation.

Still, January’s jump follows three months of very low readings in core inflation. And in the second half of last year, core prices rose at just a 1.9% annual rate.

Fed officials have welcomed the long-term decline in inflation and have continued to signal that they likely will cut their benchmark interest rate multiple times this year. Most economists expect the first reduction to occur in May or June.

One trend that is helping keep a lid on price increases is a growing consumer pushback against still-high prices, particularly for packaged foods, cars and other physical goods. CEOs at a range of companies, from PepsiCo to McDonald’s to General Mills, have said in the past month that their companies are slowing price increases for their products to pre-pandemic levels after steeper price hikes had resulted in lower sales volumes.

Inflation, as measured by the Fed’s preferred gauge, fell last year after having peaked at 7.1% in the summer of 2022. Supply chain snarls have eased, reducing costs of parts and raw materials, and a steady flow of job seekers has made it easier for employers to limit wage increases, one of the drivers of inflation. Still, inflation remains above the central bank’s 2% annual target.