Inflation hit another four-decade high in January and showed little sign of slowing down, suggesting that surging prices will continue to dog President Joe Biden’s economy.
Virtually every category of consumer prices — from food and women’s clothing to rent and airfares — went up.
The Labor Department’s report that consumer prices rose a higher-than-expected 0.6 percent for the second month in a row increased speculation in financial markets that the Federal Reserve might act more aggressively in its campaign of interest rate increases, which are expected to begin next month.
But the central bank may be reluctant to move too fast for fear of spooking investors. In any case, Fed policymakers will get another consumer price index reading before they decide how to approach that next rate-setting meeting in mid-March
“Today’s report was not encouraging, but it’s premature to conclude that the Fed will move [up rates by half a percentage point] next month,” said Roberto Perli, head of global policy research at Cornerstone Macro. “Even if the next report were to show strong price pressures, I think the Fed will be wary to make an aggressive first step in order not to risk destabilizing markets.”
“That said, if inflation continues to remain very high, the Fed will have little choice than to move fast,” he said.