Monthly U.S. inflation accelerates in January, annual figure 6.4%

By Scott Kanowsky

Investing.com -- Growth in consumer prices in the U.S. accelerated on a monthly basis in January, although the yearly pace slowed slightly, as policymakers at the Federal Reserve look for clues that its recent slew of interest rate hikes are working to quell inflation.

Labor Department data on Tuesday showed that the consumer price index rose by a seasonally adjusted 0.5% from 0.1% in December, partly reflecting an uptick in energy prices. The core number, which takes out volatile items like energy and food, increased by 0.4%.

Annually, prices for the month dipped to 6.4% from 6.5% in December - the seventh straight month of slowing expansion. Analysts had expected a reading of 6.2%.

The year-on-year core figure came in at 5.6%, down from 5.7% in the prior month and ahead of economists' predictions of 5.5%. The underlying number is closely eyed by many economic observers, including Fed officials, who believe that it provides a more accurate assessment of the future direction of inflation.

The Fed has aggressively raised borrowing costs from near-zero to a target range of between 4.5% to 4.75% in less than a year, as the U.S. central bank aims to bring down soaring prices. Despite unveiling a smaller 25-basis-point hike at its last policy meeting, Fed chair Jerome Powell has warned that rates may need to stay higher for longer given data showing resilient labor market strength.

This tightness, along with signs that inflation has both peaked and is slowly ebbing back down to the Fed's 2%, have sparked hopes that the U.S. economy may be able to dodge a recession even as elevated rates threaten to dampen activity. But Fed officials have warned that this outcome is still far from certain.

Panmure Gordon chief economist Simon French noted in a tweet that services inflation jumped by 7.2% annually when stripping out energy costs, while the corresponding price growth of goods was 1.4%. French called the difference between the two "striking," adding: "[H]ow FOMC members interpret real time signals on services inputs ([especially] shelter, wages), compared to lagged inputs into CPI is key."

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