US Inflation Slows, But Still Too High for Comfort

The Consumer Price Index (CPI) in the US climbed 6.4% in January from a year ago.  This reading showed a marginal slowdown from December's figure, making it the smallest annual increase since October 2021.

A rebound in rent and gasoline prices has been blamed for keeping US consumer prices elevated far above policymakers' target of 2%. Between December and January, the CPI rose 0.5%, picking up from 0.1% in December and showing that the Federal Reserve still has work to do in lowering inflation.

However, even as CPI eases from last year's record levels, the numbers point to some troubling economic areas. Analysts say the index that measures the price of shelter was by far the most significant contributor to the CPI, accounting for nearly half of the monthly item increase.

The indexes for food and gasoline also contributed to the rise. Leaving out volatile food and energy components, core CPI rose 5.6% from January 2022, also the smallest increase in about a year.

The annual changes in overall inflation, excluding volatile components, like food, gas and housing, showed only modest improvement. For Fed officials, the sheer stubbornness of the inflation problem supports the higher-for-longer view on interest rates.

While overall prices have been slowing, the easing in core inflation has been more uneven and concerning. Analysts believe the Federal Reserve is closely eying the volatile cost items and will use them as a reason to continue tightening.