Inflation continues to rise for the fourth consecutive month, continuing a reversal from its decline throughout most of 2024.
The Consumer Price Index (CPI)—one of the main measures of inflation—rose 0.5% in January, according to the latest data from the Bureau of Labor Statistics. The all items index rose 3% over the last 12 months, still above the Federal Reserve’s target of about 2%
The index for shelter accounted for nearly 30% of the monthly all items increase, rising 0.4% in January and 4.4% over the last 12 months.
“It will be very hard for the headline inflation number to reach the Fed’s 2% goal without a slowdown in housing costs,” said Lisa Sturtevant, chief economist for Bright MLS, in a statement. “More housing supply—both rental and for-sale housing—is the key to easing housing costs and bringing the overall rate of inflation down.”
Sturtevant also noted that shelter costs have been the “stickiest parts of the inflation measure,” and that they are also lagging by about six months based on how the CPI measures inflation.
“However, there are signs that slower home price growth and lower rents are starting to show up in the inflation measures,” she added.
The index for all items less food and energy—aka “core” inflation—rose 0.4% in January, and rose 3.3% over the last 12 months. This is a slight advance from the 0.2% rise seen in December and the 0.3% rises over several months before that. Indices that contributed to the increase in January were motor vehicle insurance, recreation, used cars and trucks, medical care, communication and airline fares.
The energy index rose 1.1% from last month, due to a 1.8% increase in the gasoline index. The energy index also rose 1% over the last 12 months. The index for food rose 0.4%, due to rises in the index for food at home (0.5%) and the index for food away from (0.2%). The food index also increased 2.5% over the 12 months.
Experts feel this upward trend will push the Federal Reserve to continue its current pause on interest rate cuts.
NAR Chief Economist Lawrence Yun said in a statement that the upward trend will “delay any rate cuts by the Fed this year until there are clear signs that either inflation is trending toward 2% or the economy begins to face net job losses.”
Yun also noted that in terms of the shelter index, despite the rising readings in recent months, inflation in this index “still represents the slowest rise in three years.”
“Perhaps some temporary oversupply in new apartment units will help restrain this component in the coming months and ultimately lead to lower inflation—and, importantly, lower mortgage rates,” he added.
On the other hand, President Trump said this morning that he feels the Federal Reserve should go through with another rate cut at its next meeting.
“Interest Rates should be lowered, something which would go hand in hand with upcoming Tariffs,” he posted on Truth Social.
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