US Inflation Rate
Last month, US annual inflation dropped but remained high, indicating that the pandemic-fueled price surge is only slowly reversing.
The U.S. Labor Department reported Tuesday that the consumer price index grew 0.3% from December to January, up from 0.2% the month before. Prices are 3.1% higher than last year.
Lower than December’s 3.4% and much below mid-2022’s 9.1% inflation peak. However, the latest estimate is still significantly above the U.S. Federal Reserve’s two percent target at a time when public anger with inflation is central to President Joe Biden’s re-election bid.
Core prices, excluding volatile food and energy, rose 0.4% last month, 0.3% in December, and 3.9% over the last year. Core inflation is frequently followed since it usually predicts inflation. The annual figure matches December’s.
Biden administration officials said inflation has dropped since pandemic-related supply shortages and government aid drove it higher three years ago. Lots of forward-looking evidence suggests inflation will stay low.
Even as it nears the Fed’s target level, many Americans are frustrated that average prices are 19% higher than when Biden entered office.
The conflicting numbers reported Tuesday may underline Fed officials’ caution, who are delighted with the steep reduction in inflation but want more evidence before assuming it will sustainably return to their 2% target. Many economists believe the central bank would wait until May or June to lower its benchmark rate from its 22-year high of 5.4.
Between March 2022 and July 2018, the Fed raised its benchmark rate 11 times to fight excessive inflation. Businesses and consumers now pay higher mortgage and vehicle loan rates. When rates fall, various loan types will have cheaper borrowing costs.
At a recent news conference, Fed Chair Jerome Powell said that six months of reduced pricing for products like used automobiles, furniture, and appliances have caused most of the inflation drop.
However, service costs—auto repairs, health care, hotel rooms, concerts, and other entertainment—are rising rapidly. Core services prices, excluding energy, rose 5.3% in 2023. The Fed wants services prices to fall to confirm inflation is falling.
A central bank rate drop cuts mortgages, auto loans, credit cards, and other consumer and commercial borrowing expenses, boosting the economy. A stronger economy could test the Fed since faster growth boosts wages and consumer spending. Businesses raise prices when they can’t meet client demand, worsening inflation.
The economy gained 3.3% in the fourth quarter of last year, which was unexpected. Thus far in 2024, growth is healthy. Businesses hired heavily last month. January manufacturing company surveys showed more orders. Services companies reported sales growth.
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US Inflation Rate US Inflation Rate US Inflation Rate US Inflation Rate US Inflation Rate