Consumer inflation in the United States slowed last month but remained elevated as economic steps seem to be producing slowly-but-surey results in bringing it under control.
The Labor Department reported Tuesday that the consumer price index rose 0.3% from December to January, up from a 0.2% increase the previous month. Compared with a year ago, prices are up 3.1%.
That is less than the 3.4% figure in December and far below the 9.1% inflation peak in mid-2022, but still well above the Federal Reserve’s 2% target level.
U.S. Treasury Secretary Janet Yellen brushed off the higher-than-expected rate and said keeping an eye on the big picture is more important.
“I think it is a tremendous mistake to focus on minor fluctuations and fail to see the longer term and the bigger trend,” Yellen told the audience at a Detroit Economic Club meeting Wednesday. “And the trend here is that inflation is moving decisively down.”
Excluding volatile food and energy costs, so-called core prices climbed 0.4% last month, up from 0.3% in December. Year-over-year, core prices were up 3.9% in January, the same as in December.
Tuesday’s report showed that the drivers of inflation have decisively shifted from goods, like used cars, gasoline and groceries, which are now falling in price or rising much more slowly, to services, including hotel rooms, restaurant meals and medical care, according to report from the Associated Press.
At his most recent news conference, Fed Chair Jerome Powell said persistently high services prices were a concern and indicated the central bank’s policymakers would like to see services inflation ease further before starting to cut their key interest rate, the AP reported.
“There’s still some inflation in the system that’s going to take some time to work through,” Omair Sharif, founder of Inflation Insights, a research firm, told the AP. “This justifies the Fed wanting to wait and see how things are going to go.”
Biden administration officials downplayed Tuesday’s report, saying average hourly pay, adjusted for inflation, rose in January and is 1.4% higher than it was a year ago. “We understand there’s more work to be done, but this is an economy that is in a much different place than it was a year ago,” said Karine Jean-Pierre, the White House press secretary. “When you see eggs and milk and products like that at the grocery store going down, they’re lower than they were a year ago, that’s important.”
