U.S. Consumer Prices Climb 0.5% In January, More Than Expected

(RTTNews) - Consumer prices in the U.S. increased by more than expected in the month of January, according to a report released by the Labor Department on Wednesday.

The Labor Department said its consumer price index advanced by 0.5 percent in January after climbing by 0.4 percent in December. Economists had expected consumer prices to rise by 0.3 percent.

The report also said the annual rate of consumer price growth accelerated to 3.0 percent in January from 2.9 percent in December, while economists had expected the pace of growth to remain unchanged.

"The jump in consumer prices in January supports our view that the Fed will hold rates steady at least through Q3 of this year," said Nationwide Chief Economist Kathy Bostjancic. "As such, we now see just one 25-bps rate cut in Q4."

"Previously we expected a rate cut in Q3 and Q4," she added. "The Fed will remain on the sidelines as it assesses the evolving economic, inflation, and policy landscape."

The bigger than expected monthly increase by consumer prices partly reflected a continued surge by energy prices, which shot up by 1.1 percent in January after spiking by 2.4 percent in December.

Excluding the jump by energy prices as well as a 0.4 percent increase by food prices, core consumer prices rose by 0.4 percent in January after inching up by 0.2 percent in December. Core prices were expected to increase by 0.3 percent.

The annual rate of core consumer price growth also ticked up to 3.3 percent in January from 3.2 percent in December. Economists had expected the pace of growth to slow to 3.1 percent.

The monthly core consumer price growth reflected a 0.4 percent increase by shelter costs as well as higher prices for motor vehicle insurance, recreation, used cars and trucks, medical care, communication, and airline fares.

Meanwhile, the report said prices for apparel, personal care, and household furnishings and operations were among the few that decreased in January.

The Labor Department is scheduled to release a separate report on Thursday on producer price inflation in the month of January.

Economists currently expect producer prices to increase by 0.3 percent in January after rising by 0.2 percent in December, while the annual rate of growth is expected to dip to 3.2 percent from 3.3 percent.