Harry Wilmerding
The Consumer Price Index (CPI) increased 0.6% in January, bringing the key inflation indicator’s year-over-year increase to 7.5%, the U.S. Bureau of Labor Statistics (BLS) reported.
The CPI remained at its near four-decade high throughout January, growing 7.5% on a year-over-year basis, the BLS reported Wednesday. Economists surveyed by The Wall Street Journal projected the index would rise around 7.2%.
The core price index, which measures inflation of goods less food and energy, increased 0.6% in January, just the same as the December 2021 figure, the BLS reported. Food prices grew 7.0% on a year-over-year basis as of January, the BLS reported, and energy prices soared 7.5%.
“While the Omicron variant may weigh on activity in the near term, the high levels of inflation and the tightness in labor markets make a compelling case to begin recalibrating the stance of monetary policy,” Loretta Mester, president of the Cleveland Fed, told the Financial Times on Wednesday, adding that she supports an interest rate hike in March.
Continued inflation challenges the Fed as it attempts to combat soaring prices without halting economic growth, the WSJ reported.
“This is not encouraging news for the Fed in the battle to get inflation heading back towards the 2% target,” James Knightley, chief international economist at ING, told the WSJ. “Rate hikes will do nothing to resolve supply chain strains and worker shortages, but they can contribute to taking some of the steam out of the economy and allow demand and supply to start moving toward a better balance at the expense of weaker growth.”
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