Federal Reserve officials have been cautious about lowering interest rates as inflation has remained persistently above the Fed’s 2% target rate.
January’s inflation news didn‘t do anything to help the situation.
The U.S. inflation accelerated last month as the cost of groceries, gasoline and rents rose. According to statistics released by the Wednesday by the Labor Department, the consumer price index increased 3% in January from a year ago. That’s up from 2.9% the previous month. In September, it was at a 3-1/2-year low of 2.4%.
The new data shows that inflation has remained stubbornly above the Fed’s 2% target for roughly the past six months after it fell steadily for about 18 months.
“We’re really not making progress on inflation right now,” Sarah House, senior economist at Wells Fargo, told The Associated Press. “This just extends the Fed’s hold.”
According to the AP report, excluding food and energy categories, core consumer prices rose 3.3% in January compared with a year ago, up from 3.2% in December. Economists closely watch core prices because they can provide a better read of inflation’s future path, the AP said.
Inflation also worsened on a monthly basis, with prices jumping 0.5% in January from December, the largest increase since August 2023. Core prices climbed 0.4% last month, the most since March 2024.
Fed Chair Jerome Powell testified to the House Financial Services committee that the Fed “has made great progress” on inflation “but we’re not quite there yet,”
“Today’s inflation print … says the same thing,” he added. As a result, the Fed wants to keep rates “restrictive for now,” he said. At its current level, the Fed’s key rate is restricting borrowing and spending by consumers and businesses, Powell has said.
