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Rents push up U.S. consumer prices; inflation gradually cooling
CGTN
Customers shop in a supermarket in San Mateo, California, United States, September 13, 2022. /CFP
Customers shop in a supermarket in San Mateo, California, United States, September 13, 2022. /CFP

Customers shop in a supermarket in San Mateo, California, United States, September 13, 2022. /CFP

U.S. consumer prices accelerated in January as Americans continued to be burdened by higher costs for rental housing and food, suggesting that the Federal Reserve (Fed) was far from pausing its campaign to hike interest rates.

The report from the Labor Department on Tuesday also showed the pace of disinflation in the annual consumer price measures slowing last month. Still, the continued gradual slowdown in inflation is likely to keep the Fed on a moderate interest rate hiking path. Sticky inflation and a stubbornly tight labor market have led some economists to expect that the U.S. central bank could continue hiking rates through 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. "The Fed will not make decisions based on just one report but clearly the risks are rising that inflation will not cool fast enough for the Fed's liking."

The consumer price index (CPI) increased 0.5 percent last month after gaining 0.1 percent in December. A 0.7-percent rise in the cost of shelter, which mostly reflected rents, accounted for nearly half of the monthly increase in the CPI.

Inflation was also boosted by rising gasoline prices, which rebounded 2.4 percent after declining for two straight months. Americans also paid more for natural gas and electricity.

There were also increases in the prices of food, which rose 0.5 percent after advancing 0.4 percent in December. The cost of food consumed at home climbed 0.4 percent, lifted by rising prices for meat, fish and eggs. Prices for cereals and bakery goods rose as did nonalcoholic beverages, but fruits and vegetables cost less.

January's increase in the CPI was in line with economists' expectations. Economists said some of the rises in the monthly CPI reflected price increases at the start of the year, mostly evident in the 2.1-percent surge in prescription drugs and a 1.2-percent jump in motor vehicle fees.

"In today's higher-inflation environment, firms are likely to implement larger price increases when they reset their prices than they normally would when inflation was low and stable, leading the seasonal factors to underestimate inflation at the start of the year when price resetting is more common," economists at Goldman Sachs wrote in a note.

The Labor Department's Bureau of Labor Statistics also updated the seasonal adjustment factors, the model that it uses to strip out seasonal fluctuations from the data.

In the 12 months through January, the CPI increased 6.4 percent. That was the smallest gain since October 2021 and followed a 6.5-percent rise in December. The revisions to the 2022 CPI account for the modest slowdown in the year-on-year CPI.

The annual CPI peaked at 9.1 percent in June, which was the biggest increase since November 1981.

U.S. President Joe Biden said in a statement 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."

(Source: Reuters with edits)

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