Inflation in the United States cooled more than expected in January, dropping to its lowest level in nine months as price pressures eased across several consumer staples, according to data released Friday by the Bureau of Labor Statistics.
The Consumer Price Index (CPI), a key inflation gauge, rose 2.4% in January compared to a year earlier, down from 2.7% in December and below economists’ expectations of 2.5%. On a monthly basis, prices increased by just 0.2%.
“Headline CPI inflation was a touch softer than expected in January, delivering a welcome surprise to the downside at the beginning of the year,” said Bernard Yaros, lead economist at Oxford Economics, according to CNBC.
Core inflation, which excludes volatile food and energy prices, rose 0.3% for the month and 2.5% annually, marking the slowest annual increase in core inflation since March 2021.
Despite the improvement, inflation remains above the Federal Reserve’s 2% target.
Some categories continue to show elevated prices. Food inflation ran at 2.9% annually in January, with beef prices up about 15% and coffee prices up roughly 18% due to supply constraints. Utility gas service prices increased approximately 10% from a year ago, while electricity prices rose about 6% annually, partly due to increased demand from data centers supporting artificial intelligence development.
Meanwhile, gasoline prices fell about 3% for the month and 7.5% annually. Used car prices also declined, dropping 1.8% from December.
“The downside surprise in the January CPI is welcome news for the Federal Reserve, but we aren’t changing the baseline forecast for monetary policy based on one inflation reading,” Yaros noted, adding that lingering shutdown distortions and solid economic growth will likely keep the central bank on hold until June.
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