Policy- The consumer price index rose by 3.1% year over year in January, higher than the forecast of 2.9%.
- That's also below the 3.4% rise in December.
Inflation as measured by the consumer price index, or CPI, came in above the forecast for January.
January's year-over-year rise in the CPI was expected to be 2.9%, which would've been a massive slowdown from December's 3.4% reading. The Bureau of Labor Statistics said on Tuesday that the year-over-year change was 3.1%, slightly higher than the forecast.
CPI increased by 0.3% month over month in January. That's just above the forecast of 0.2% and above December's month-over-month increase of 0.2%.
Core CPI, excluding volatile food and energy prices, rose by 3.9% from January 2023 to January 2024 after increasing by 3.9% from December 2022 to December 2023. The new reading came in above the forecast of 3.7%.
Core CPI surged by 0.4% month-over-month in January. An increase of 0.3% for January was expected.
The shelter index rose by 6% year over year in January, just below the increase of 6.2% in December, marking another month of cooling. The bureau said this accounted "for over two thirds of the total 12-month increase in the all items less food and energy index." The shelter index also rose by 0.6% month over month in January after a month-over-month increase of 0.4% for both November and December.
Meanwhile, the index for energy declined by 4.6%, a bigger decline than the 2% decline in December. Gas prices fell by 6.4% for the 12 months ending in January. The energy index declined month over month by 0.9% in January, compared with a 0.2% decline in December. The index for gasoline fell by 3.3% in January from the preceding month.
The food index surged by 0.4% month over month. Specifically, food away from home rose by 0.5% and food at home rose by 0.4% from the preceding month.
The food index climbed by 2.6% for the 12 months ending January, similar to the 2.7% rise for the 12 months ending in December.
Additionally, the bureau said on Tuesday that real average hourly earnings increased. It said that given the 0.6% rise in average hourly earnings in January plus the 0.3% increase in the CPI month over month, real average hourly earnings rose by 0.3%.
"Consumer sentiment has recently moved sharply higher partly because of improving outlooks for inflation and income," Mark Hamrick, a senior economic analyst for Bankrate, said in commentary before the CPI data was published. "One added benefit of the moderation of inflation is the emergence of positive real wages."
The consumer sentiment index from the University of Michigan's Surveys of Consumers climbed to 79 in January from 69.7 in December. The index of consumer expectations also surged to 77.1 in January from 67.4 in December. Additionally, the New York Fed's Survey of Consumer Expectations shows the one-year-ahead median expected inflation rate had largely been cooling but stayed at 3% in January.
"The January inflation data came in hotter than expected, which serves to dampen expectations for an interest rate cut in the near term," Hamrick said in commentary after the new CPI data was released. "While it is disappointing for those eager to see an interest rate reduction, one must be mindful that economic data seldom moves along a straight line."
But there's more data the Federal Reserve can look at before the next Federal Open Market Committee meeting in March, including the jobs report showing how the job market fared in February.
"The Fed will see another CPI release before they meet again," Elizabeth Renter, a data analyst at NerdWallet, said in commentary. "They'll also see another PCE index (their preferred inflation measure), a jobs report, a JOLTS release and a stack of other economic data releases. That doesn't mean today's inflation numbers don't matter, but rather that they're a single touchpoint in a catalog of recent-past and upcoming indicators."