© Reuters. FILE PHOTO: A man shops for produce at Best World Supermarket in the Mount Pleasant neighborhood of Washington, D.C., U.S., August 19, 2022. REUTERS/Sarah Silbiger/File Photo
By Lucia Mutikani
WASHINGTON (Reuters) -U.S. consumer prices rose more than expected in January amid a surge in the cost of shelter, but the pick-up in inflation did not change expectations that the Federal Reserve will start cutting interest rates in the first half of this year.
The largest increase in prices in four months reported by the Labor Department on Tuesday came against the backdrop of labor market strength and economic resilience. Some economists also blamed difficulties adjusting the data for seasonal fluctuations for the stronger-than-expected inflation readings.
“Today’s data is not what markets or the Fed would have liked to see, but it’s important not to over react and jump to the assumption that an inflationary resurgence is developing,” said Seema Shah, chief global strategist at Principal Asset Management. “A March cut is completely off the agenda, but May could still be in play if economic activity plays ball and finally starts to show the impact from prior Fed tightening.”
The consumer price index (CPI) increased 0.3% last month after gaining 0.2% in December, the Labor Department’s Bureau of Labor Statistics said. Shelter, which includes rents, accounted for more than two-thirds of the rise in the CPI.
New weights, published last week, which saw the housing share rising and that of new and used cars lowered, were used to calculate the January consumer price data.
Companies also push through price increases at the start of the year, which was evident in strong rises in the costs of medical care services and tobacco products.
Food prices rose 0.4%. Grocery food inflation also increased 0.4%, boosted by more expensive sugar and sweets as well as fats and oils. Prices for nonalcoholic beverages shot up 1.2%, while the cost of fruits and vegetables rose 0.4%. But cereals and bakery products were cheaper. Prices for meat, eggs and fish were unchanged. Gasoline prices dropped 3.3%.
In the 12 months through January, the CPI increased 3.1% after advancing 3.4% in December. Economists polled by Reuters had forecast the CPI gaining 0.2% on the month and rising 2.9% year-on-year. The annual increase in consumer prices has moderated from a peak of 9.1% in June 2022.
Annual revisions to the CPI data published last Friday were mixed, but generally showed…