In January, US inflation rose.
The Labor Ministry said Wednesday that the Consumer Price Index (CPI) rose 0.5% from the previous month, up more than expected. Compared to a year ago, consumer prices have risen by 3%.
Economists had expected the monthly inflation pace to 0.3% after prices rose 0.4% in December. The median forecast was consistent year-on-year, sought an increase of 2.9% over the past 12 months. None of the economies surveyed by Econoday have seen prices rise to 0.5% or 3% of the year in a month.
Core inflation, a metric that excludes unstable food and energy prices, rose 0.4% that month at a rate of double December. Economists had predicted a slight increase of 0.3%.
Compared to a year ago, the core price has increased by 3.3%, exceeding the 3.2% recorded in December. Economists had forecast a year-on-year decline of 3.2%.
The strength of the unexpected inflationary forces raises doubts the Fed's decision to lower fees at each of the last three meetings of the Federal Open Market Committee last year.
Speaker Jerome Powell told the Senate committee on Tuesday that the Fed is no longer in a hurry to pay. The labour market has proven to be more resilient than the Fed expects, and inflation is more sustainable.
The market was priced with two cuts this year, but these weren't expected until this summer. Following the inflation report, the federal fund futures market showed that it was likely that the Fed would cut once. Some investors expect the Fed's next rate movement could rise rather than decrease.
Stocks and bonds sunk after data was released. The dollar has been strengthened against most foreign currency as higher interest rates make the dollar more attractive.
Housing inflation, a major driver of prices in the services sector, remained rising. Shelter costs rose 0.4% in January, with equivalent rents for owners and 0.3% each. As housing prices continue to rise, affordability remains a challenge, putting pressure on policymakers assessing inflation trajectories.
Food prices rose 0.5% in January as egg prices rose 15.2%. Core inflation showed sustained pressure with higher inflation in prescription drugs, car insurance, airfares, used car prices and hotel prices.
Energy costs rose 1.8% compared to a month ago.
Inflation spread in January. Another measure of excluding food and energy, Core Commodity Price has increased by 0.3%, the highest property inflation rate since May 2023. Core services inflation excluding energy services increased by 0.5%.
If prices rise at the remaining January pace of the year, inflation will rise to 5.7%.
