U.S. inflation rose hotter-than-expected 3.1% in January, dimming hopes for Fed rate cuts

U.S. inflation rose 3.1% in January, a hotter-than-expected increase that dims hopes that the U.S. Federal Reserve will begin cutting interest rates this spring.

Shannon Thaler for The New York Post:
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Last month’s Consumer Price Index — which tracks changes in the costs of everyday goods and services — came in higher than the 2.9% figure economists had expected, according to FacfSet.

Core CPI — a number that excludes volatile food and energy prices — increased 0.4% in January, to 3.9%, after rising 0.3% in December. The figure, a closely-watched gauge among policymakers for long-term trends, was also higher than what economists at FactSet expected.

The Bureau of Labor Statistics attributed the CPI’s increase to the shelter index, which rose 0.6% on a monthly basis and contributed to two-thirds of the monthly all-items increase. The food index increased 0.4% in January, more than the 0.2% it advanced in December.

The Bureau of Labor Statistics’ latest CPI report underscores that cash-strapped Americans, who are still dealing with retail prices far above where they were before the pandemic.

January’s jobs report was the first major piece of economic data since the Federal Reserve’s latest policy meeting, when central bankers unanimously decided to keep interest rates at their current 22-year high, between 5.25% and 5.5%;

[T]he economy remains Americans’ overall top concern, cited by 22% of poll respondents, as they have struggled with inflation and other aftershocks of the COVID-19 pandemic, according to a Reuters/Ipsos poll released last month.

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MacDailyNews Take: As we wrote last February, “When certain quarters, including the Fed, delude themselves and others that ‘inflation is transitory’ and waste at least a year before doing a mere portion of what is necessary* (interest rate hikes), the price will be paid for being delusional and late.”

Catching up will be difficult. But, hey, good luck on that soft landing. – MacDailyNews, September 13, 2022

In January, Interactive Brokers founder Thomas Peterffy said of the U.S. Federal Reserve, “If they really wanted to stop inflation, they would have to raise rates to 4%, 5%, 6%.”

Peterffy may have been too conservative. Rates in excess of 6% may be required at this point. – MacDailyNews, October 13, 2022

‘Tis best to get a handle on inflation, if you know how, while you still can. – MacDailyNews, May 11, 2021

*Stop the misguided crusade against domestic energy production and profligate federal spending and inflation will be stopped dead in its tracks. It’s not difficult. – MacDailyNews, May 11, 2022
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