US consumer prices rise with higher rents, inflation gradually slowing

WASHINGTON D.C.: A Labor Department report released this week showed that Americans continued to be hit by higher costs for rent and food, causing US consumer prices to accelerate in January, adding to expectations that the Federal Reserve Bank will likely maintain its policy of continuing to raise interest rates.

The report also indicated that inflation slowed last month, which will likely lead the US central bank to hike interest rates at a more moderate pace.

Due to persistent inflation and a tight labor market, the Fed could continue hiking rates through the summer.

"Inflation is easing, but the path to lower inflation will not likely be smooth," said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina, as quoted by Reuters.

Last month, the consumer price index rose 0.5 percent, after gaining 0.1 percent in December, and a 0.7 percent increase in the cost of accommodation, mainly made up of rents, accounted for nearly half of the monthly CPI increase.

Inflation was also boosted by rising gasoline prices, which increased again by 2.4 percent after dropping for two consecutive months.

January’s increase in the CPI was in line with economists’ expectations.

The Labor Department’s Bureau of Labor Statistics also updated the seasonal adjustment factors, its model for stripping out seasonal fluctuations from the data.

In June, the annual Consumer Price Index peaked at 9.1 percent, the highest increase since November 1981.

In a statement, President Joe Biden said that the CPI report "reinforces that we have made historic progress and are on the right track, and now we need to finish the job."

However, Kathy Bostjancic, chief economist at Nationwide, said, "The risks lie on the upside for further rate increases," according to Reuters.

In the 12 months through January, core CPI rose 5.6 percent, the smallest increase since December 2021, after rising 5.7 percent in December.

"We continue to look for inflation to trend lower, but we believe getting back to an inflation rate the Fed can live with on a sustained basis will neither be quick nor painless," added Sarah House, a senior economist at Wells Fargo in Charlotte, North Carolina, as reported by Reuters.