December’s Consumer Price Index Improvement Short-Lived
High hopes in January of a further easing of the Federal Reserve’s key interest rate increases appears to have been short lived as the start of 2023 saw U.S. consumer prices rise “briskly.” According to the U.S. Bureau of Labor’s (BOL) updated February 14th report the Consumer Price Index for All Urban Consumers (CPI-U) rose 0.5 percent in January on a seasonally adjusted basis, after increasing a more moderate 0.1 percent in December — a “sign of persistent inflationary pressures that could push the Federal Reserve to raise interest rates even higher than previously expected.” The all items index increased 6.4 percent over the past 12 months before seasonal adjustment. Shelter was the largest contributor by far to the January all items increase, the index at the end of January increased 7.9 percent over the last year before seasonal adjustment. Economists see the “so-called core CPI,” which excludes food and energy, as a better indicator of underlying inflation than the CPI-U, having advanced 0.4% in January — up 5.6 percent from January 2022. However, both indices remain higher than the Fed’s 2 percent target, which is based on a separate Commerce Department index; and as long as shelter costs continue to rise rapidly, it’s going to be difficult to get inflation down to the level the Fed is seeking to achieve.