The latest Consumer Price Index (CPI) showed that inflation rose 0.3% from December to January, coming in hotter than economists had expected. On an annual basis, CPI fell from 3.4% to 3.1%, not quite as low as forecasted but still a move in the right direction.
Core CPI, which strips out volatile food and energy prices, increased 0.4% while the annual reading remained at 3.9%. Both figures were slightly higher than estimates.
Rising shelter, motor vehicle insurance and medical care service costs helped push inflation higher last month. However, shelter costs have been moderating based on other reports, which should help inflation cool further once the reporting catches up.
What’s the bottom line? Even though the latest inflation numbers were hotter than expected, inflation has made significant progress lower after peaking in 2022. The headline reading is now at 3.1% (down from 9.1%), while the core reading is at 3.9% (down from 6.6%).