Washington DC February 12 2025: U.S. consumer prices increased by the most in nearly 1-1/2 years in January, with Americans facing higher costs for housing and food, reinforcing the Federal Reserve’s message that it was in no rush to resume cutting interest rates amid growing uncertainty over the economy.
The hotter-than-expected inflation reported by the Labor Department on Wednesday was likely partly due to businesses raising prices at the start of the year. However, the surge in prices offered a cautionary note to President Donald Trump’s push for tariffs on imported goods, which have been panned by economists as inflationary.
Trump was elected on promises to lower prices for inflation-weary consumers. High inflation could imperil the Trump administration’s agenda, including tax cuts, which could overstimulate a healthy economy, and mass deportations of undocumented immigrants that are seen causing labor shortages and raising costs such as wages for businesses.
“With President Trump threatening to impose wide-ranging inflationary tariffs, the Fed won’t resume cutting interest rates this year,” said Paul Ashworth, chief North America economist at Capital Economics.
The consumer price index jumped 0.5% last month, the biggest gain since August 2023, after rising 0.4% in December, the Labor Department’s Bureau of Labor Statistics (BLS) said. Shelter, which includes rents, increased 0.4% and accounted for nearly 30% of the rise in the CPI. That followed two straight monthly gains of 0.3%.
Food prices rose 0.4% after increasing 0.3% in December. Grocery store prices surged 0.5%, with the cost of eggs soaring 15.2%, the largest increase since June 2015. That accounted for about two-thirds of the rise in prices at the supermarket. An avian flu outbreak has caused a shortage of eggs, driving up prices.
Prices also rose for meats, poultry and fish as well as for nonalcoholic beverages and dairy products. Gasoline prices rose 1.8% while natural gas cost 1.8% more, but electricity prices were unchanged.
In the 12 months through January, the CPI increased 3.0% after advancing 2.9% in December. Economists polled by Reuters had forecast the CPI gaining 0.3% and rising 2.9% year-on-year.
The BLS updated weights and seasonal adjustment factors, the model that the government uses to strip out seasonal fluctuations from the data to reflect price movements in 2024.
