2023 began with a rise in inflation in the US, as a result of the impact of higher housing, gas, and fuel prices on consumers.
While price increases have been declining in recent months, January data shows that inflation remains strong and threatens the US economy which is at risk of slipping into a recession this year.
This came despite the Federal Reserve’s efforts to calm the matter. The central bank has raised its benchmark interest rate eight times since March 2022 as inflation soared to a 41-year high last summer.
In recent days, Federal Reserve Chairman Jerome Powell has spoken of “inflation-disrupting” forces playing a role, but January figures show the Fed may still have work to do.
Read: US inflation news to be published today. Will the decline continue?
Figures released by the Labor Department on Tuesday showed that the consumer price index, which measures a broad basket of public goods and services, rose 0.5 percent in January after a 0.1 percent increase in December.
The month-on-month rise in inflation was partly influenced by higher gasoline prices, which rose 3.6 percent in January, according to data from the U.S. Energy Information Administration.
Excluding food and energy, the core CPI rose 0.4 percent monthly and 5.6 percent from a year ago, versus previous estimates of 0.3 percent and 5.5 percent.
Markets were volatile after the release of inflation figures, with Dow Jones futures steady.
The Office of Labor Statistics said in the report that rising shelter costs accounted for about half of the monthly increase.
The shelter component makes up more than a third of the index and rose 0.7 percent month-on-month and up 7.9 percent from a year ago. The consumer price index rose 0.1 percent in December.
Energy was also an important contributor, rising 2 percent and 8.7 percent, respectively, while food costs rose 0.5 percent and 10.1 percent, respectively.
Higher prices mean a loss of real wages for workers. Average hourly earnings fell 0.2 percent for the month and were down 1.8 percent from a year ago, CNBC reported.
Markets expect the Fed to raise its overnight borrowing rate another half a percentage point from the current target range of 4.5 percent-4.75 percent. This would give policymakers time to monitor the broader economic effects of monetary policy tightening before deciding how to proceed.
If inflation does not decline, it means further rate hikes.
There is a widespread belief that the economy could slide into a shallow recession at least later this year or early 2023. However, the latest tracking data from the Federal Reserve Bank of Atlanta points to expected GDP growth of 2.2 percent for the first quarter, after a relatively strong end to 2022.
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