Consumer prices in the United States rose at their fastest pace in nearly 1.5 years in January, driven by increases in the cost of shelter, food, and gasoline. The Consumer Price Index (CPI) increased by 0.5% for the month, contributing to a year-on-year gain of 3.0%, according to the latest data. The core CPI, which excludes the volatile food and energy components, increased by 0.4% in January and has risen by 3.3% over the past year.
These gains were largely attributed to higher prices for rent and groceries, which have shown a steady uptick over the past few months. The recent rise in inflation is likely to diminish hopes for any near-term rate cuts by the Federal Reserve, as the data suggests a persistent upward trend in prices. Wednesday’s data appeared to rattle investors, with Wall Street coming under pressure.
The S&P 500 and Dow Jones industrial average were each down about 1% after New York opened for trading. The 10-year US treasury yield – a key barometer for US economic expectations – rose to about 4.629%. Inflation soared across much of the world three years ago as the pandemic continued to distort the global economy and supply chains.
January inflation dampens rate cut hopes
It peaked at 9.1% in the US, its highest level in a generation. While price growth has since fallen dramatically, consumer prices have remained high, proving remarkably resilient.
The latest inflation data will heighten speculation about how quickly policymakers at the US Federal Reserve will cut interest rates, which they raised aggressively in an attempt to cool the world’s largest economy and reduce price growth. Many economists have warned that Trump’s tariff strategy risks exacerbating inflation. As millions of Americans struggled with the cost of living last year, Trump promised to take action on the campaign trail.
“Prices will come down,” he said during one speech. “You just watch – they’ll come down, and they’ll come down fast.”
Since his election victory last November, however, Trump has appeared to soften his pledge. “I’d like to bring them down,” he said of prices in December.
“It’s hard to bring things down once they’re up. You know, it’s very hard.”
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