January US Consumer Inflation Moderated, but Fell Short of Expectations

America’s Inflation Struggle: Lowering Prices is a Step in the Right Direction, but Burden Still Weighs Heavy

In January 2024, Americans got a bit of relief from the steep price hikes they have endured in recent months. The Consumer Price Index (CPI) for the 12 months ended in January showed that prices rose by 3.1%, which is a step back from December’s 3.4% rate and a dramatic cooling from the 6.4% increase seen in January 2023. On a monthly basis, CPI rose by 0.3%, with stubbornly high shelter costs accounting for two-thirds of the gain. While gas prices fell, food prices, which had thankfully stopped outpacing overall inflation, rose at their highest monthly rate in a year.

Food prices are volatile and can be influenced by various factors such as weather events and disease, but they moved in the wrong direction for many Americans. According to Robert Frick, corporate economist with Navy Federal Credit Union, “Food prices kept going up, and that’s a real pain point.” He explained that even though inflation rates are coming down, the weight of inflation continues to mount. Economists expected inflation to ease to 0.2% from December and slow to an annual rate of 2.9%, according to FactSet consensus estimates. However, overall inflation has risen at an annual rate of at least 3% for over three years – the longest streak since the late 1980s and early 1990s.

Inflation has been measured using the Consumer Price Index (CPI) for over three years now, with annual increases surging post-pandemic and peaking at 9.1% in June 2022. The Federal Reserve (Fed) introduced aggressive rate hikes starting in March 2022 to crush demand and discourage spending – a total of eleven hikes were made until then. Excluding more volatile categories such as food and energy, the core CPI index rose by only 0.4% from December, with no change seen in annual rates compared to those reported earlier.

Overall price increases have been an issue for Americans who have experienced some of their steepest price hikes in four decades during this pandemic era.

Frick stated that while it may seem like progress with lowering inflation rates every month, people still carry the burden of mounting inflation on top of it.

Economists are still struggling to control overall inflation levels despite Fed’s efforts with aggressive rate hikes since March

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