Inflation Continued to Moderate, but Remained Persistent, in January

February 14, 2023

Inflation moderated slightly in January but remains persistently high as consumers continue to face increased prices for food, housing, energy, and many other items.

The month’s consumer price index (CPI) was something of a mixed bag. On a monthly basis, inflation accelerated at the fastest pace in three months, increasing 0.5% from December. However, on a year-over-year basis, inflation continued to slow, falling to 6.4% in January, down from December’s 6.5% annual increase. That marks the seventh consecutive month that has seen annual inflation ease, down from a recent peak of 9.1% in June.

The pace of deceleration is moderating, and inflation was higher than expected on both a monthly and annual basis. Economists surveyed by Dow Jones had been looking for respective increases of 0.4% and 6.2%. The so-called “core” CPI, which strips out volatile components like food and energy, increased 0.4% monthly and 5.6% from a year ago, against respective estimates of 0.3% and 5.5%.

Housing costs accounted for roughly half the monthly increase, according to the Bureau of Labor Statistics. The component accounts for more than one-third of the index and rose 0.7% on the month and was up 7.9% from a year ago. Energy also was a significant contributor, up 2% and 8.7%, respectively, while food costs rose 0.5% and 10.1%, respectively.

The stronger-than-expected inflation report is likely to keep Federal Reserve officials on track to raise interest rates at their meeting in March and to potentially signal further increases beyond that.

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