Prices Rose More Than Expected in January as Inflation Persists

February 14, 2024

Prices rose more than expected in January as stubbornly high housing prices weighed on consumers and drove inflation higher.

The consumer price index (CPI), a measure of the prices that shoppers pay for a common basket of goods and services across the economy, climbed by 0.3% in January from the month prior, according to the Bureau of Labor Statistics (BLS). On an annual basis, the CPI was up 3.1% in January, down from 3.4% in December.

While the annual CPI increase slowed from December to January, the pace of the slowdown fell short of economist expectations. Economists surveyed by Dow Jones had been looking for a monthly increase of 0.2% and an annual gain of 2.9%.

Excluding volatile food and energy prices, the so-called “core” CPI accelerated 0.4% in January and was up 3.9% from a year ago, unchanged from December’s annual increase and again topping economists’ forecasts of 0.3% and 3.7% increases, respectively.

Shelter prices, which account for roughly one-third of the CPI weighting, accounted for much of the month’s rise. The index that tracks the category climbed 0.6% on the month, contributing more than two-thirds of the total headline increase, according to the BLS. On a year-over-year basis, shelter rose 6%.

Food prices also contributed to the increase, climbing 0.4% for the month. Energy prices helped offset the other categories’ increases, falling 0.9%, led by a 3.3% slide in gasoline prices.

The inflation data comes as Federal Reserve policymakers are debating the proper balance for monetary policy in 2024. Financial markets have been looking for aggressive interest rate cuts, but Fed officials have been more cautious in their public statements. The higher-than-expected inflation figures are likely to support the Fed’s more reserved stance, and they believe that inflation will trend down toward their 2% target as shelter prices decelerate throughout the year. The way CPI calculates shelter costs means there is a pronounced lag between what CPI is saying and what more real-time sources of data are saying.

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