US inflation continued to cool in January, rising at an annual rate of 6.4%, according to figures released by the Bureau of Labor Statistics.
The consumer price index (CPI) – which measures a basket of goods and services – has now fallen for seven consecutive months, down from a four-decade high of 9.1% last June, and down from an annual rate of 6.5% in December.
On a monthly basis, prices rose 0.5% from 0.1% in December, showing the continuing strength of inflationary pressures as the cost of housing/shelter rose again.
The fall was smaller than some economists had expected, but January’s rise was still the smallest 12-month increase since the period ending October 2021. After subtracting volatile food and energy prices, the so-called “core index” rose 5.6% over the last 12 months, its smallest 12-month increase since December 2021.
While the fall is welcome news and has mitigated some of the cost of living crisis that has seen the price of goods from eggs and orange juice to rents and healthcare soar, the latest reading is still far higher than the Federal Reserve’s annual target rate of 2% inflation.
The still-rising cost of shelter accounted for nearly half the monthly “all-items” increase, rising 0.7% over the month and 7.9% higher than a year ago. The indexes for food, gasoline, and natural gas also contributed to the rise.
The latest inflation numbers follow evidence of the continuing strength of the US jobs market. In January, the US added more than 500,000 new jobs, roughly three times the number economists had been expecting.
The strength of the jobs market has worried some Fed officials, who are concerned that the tight labor market will lead to wage rises and will feed inflationary pressures. The Fed chair, Jerome Powell, has acknowledged that the spike in inflation – the most severe in decades – is easing. But earlier this month he indicated that the central bank will continue to raise interest rates as it fights to bring price rises back to the Fed’s target rate.
Powell said: “We covered a lot of ground, and the full effects of our rapid tightening so far are yet to be felt. Even so, we have more work to do.”
