U.S. Inflation Worsened Last Month As Grocery, Gasoline Prices Soared

U.S. inflation accelerated last month as the cost of groceries, gasoline, and rent rose, disappointing households and businesses while likely reinforcing the Federal Reserve’s hesitation to cut interest rates, Christopher Rugaber reported for the Associated Press (AP).

Higher inflation was a political challenge for former President Joe Biden and is now a key issue for President Donald Trump, who campaigned on promises to lower prices.

The Consumer Price Index (CPI) increased 3% in January year-over-year, up from 2.9% in December, and significantly above September’s 3.5-year low of 2.4%. Inflation has remained stubbornly above the Fed’s 2% target for the past six months, despite steady declines in 2023.

Higher inflation was a political challenge for former President Joe Biden and is now a key issue for President Donald Trump, who campaigned on promises to lower prices.

However, many economists warn that Trump’s proposed tariffs could further increase costs.

The unexpected rise in inflation dampened some of the business optimism that followed Trump’s election, which was fueled by expectations of tax cuts and deregulation. Following the report, Dow futures tumbled 400 points, and bond yields rose, signaling market fears of persistent inflation and high interest rates.

“We’re really not making progress on inflation right now,” said Sarah House, senior economist at Wells Fargo. “This just extends the Fed’s hold.”

Inflation typically rises in January, as many companies adjust prices at the start of the year. However, the government’s seasonal adjustments are intended to filter out these effects.