The pace of consumer price increases eased again in January compared with a year earlier, the latest sign that the high inflation that has gripped Americans for nearly two years is slowly easing.
At the same time, Tuesday's consumer price report from the government showed that inflationary pressures in the U.S. economy remain stubborn and are likely to keep prices elevated well into this year. Rising costs will also keep pressure on the Federal Reserve to raise its benchmark interest rate further and to keep it there through year's end.
The data show that while inflation is fading, it is likely to do so slowly and unevenly. The government also incorporated annual revisions of its methods into January's inflation report, which caused monthly increases in the final three months of last year to be higher than originally reported. Combined with January's price figures, the slowdown in inflation since the fall is now more gradual than it seemed just a few weeks ago.
"These things never happen in a straight line," said Tiffany Wilding, an economist at PIMCO, an asset management firm. "But I think the overall balance of evidence suggests that we are starting to see inflation move in the right direction."But "this process is likely to take quite a bit of time," he added. "It's not going to be, we don't think, smooth, it's probably going to be bumpy.
Used car prices, which had soared in 2021 and early last year amid widespread supply disruptions, dropped 1.9% last month, the seventh straight decline. They're now 11.9% lower than they were a year ago. More expensive food, along with other rising costs, has caused Pat DeCandia, a 65-year-old retired teacher from Ridgefield, New Jersey, to change her buying habits. She will no longer buy specialty items like smoked salmon from Costco.DeCandia is buying more store label items, which are typically cheaper.
The Fed is particularly focused on the cost of services excluding housing. That is because the prices of labor-intensive services tend to be especially difficult to curb. With the strong job market compelling employers to raise pay to attract and keep workers, employers are often passing on those higher labor costs to their customers by charging more.
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