The rise in U.S. inflation to 3 percent in January has intensified discussions regarding the Federal Reserve's potential extension of a pause on interest rate cuts. According to the latest data from the Bureau of Labor Statistics released on Wednesday, the Consumer Price Index saw a significant increase, jumping 0.5 percent from December. This marks the fastest monthly increase since August 2023, with the annual inflation rate hitting 2.9 percent last month.
The "Core" C.P.I., which is a more accurate measure of underlying inflation as it excludes volatile food and energy prices, also displayed minimal improvement. It rose 0.4 percent from December, translating to a 3.3 percent increase on a year-over-year basis, both figures surpassing economist expectations. This monthly increment in core prices is the highest observed since April 2023.
The January inflation data highlights the uneven nature of the central bank’s efforts to combat high prices. Although inflation has significantly decreased from its peak of over 9 percent in 2022, recent months have shown erratic progress.
Austan Goolsbee, the president of the Federal Reserve Bank of Chicago, described the fresh inflation report as "sobering." Despite his caution against over-interpreting a single report, especially after two months of more "encouraging" outcomes, he acknowledged the seasonal quirks typical of January data. Goolsbee, who will have a vote on policy decisions this year, implied that the report presents an unwelcome development in the context of ongoing economic challenges.
