Underlying US inflation rose as expected at the start of the year as higher services costs offset stable goods prices.
The core consumer price index, which excludes often-volatile food and energy costs, increased 0.3% from December, the most since August, according to Bureau of Labor Statistics data out Friday. At the same time the core CPI rose from a year ago by the least since 2021.
January inflation readings have been strong in recent years, often beating expectations as companies tend to raise their prices at the start of the year. Many economists had called for an even bigger pickup in the core CPI for that reason, as well as predictions that firms would pass along more tariff-related costs to consumers.
Markets rallied in relief as the figure was relatively tame and came in line with the median projection. Treasury yields fell and stock futures edged higher, while traders boosted bets for the Federal Reserve to cut interest rates three times this year.
| Metric | Actual | Estimate |
|---|---|---|
| CPI MoM | +0.2% | +0.3% |
| Core CPI MoM | +0.3% | +0.3% |
| CPI YoY | +2.4% | +2.5% |
| Core CPI YoY | +2.5% | +2.5% |
The slight pickup in inflation reflected higher prices for airline fares, personal care, recreational goods, medical care and communication. However, prices of used cars and trucks, household furnishings and auto insurance decreased last month.
Alongside recent indications of a stabilizing labor market, Fed officials will likely want to see further inflation progress before lowering interest rates.
Services prices, excluding energy, rose 0.4% — the most since July. Airfares climbed by the most since mid-2022, while other categories like auto rentals and parking costs also jumped.
With the latest data, the BLS also incorporated new seasonal adjustment factors, with the previous five years' of data subject to revision. The agency also adjusts the relative importance of the individual price categories that make up the CPI.
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