US Inflation Cools in January but Underlying Pressures Persist
Figure 9 One-Month Percent Change in Consumer Price Index Source: Bureau of Labor Statistics) US inflation seems to have eased at the start of the year, but the slowdown may not fully reflect underlying price pressures. While lower energy and gasoline costs helped moderate headline figures, structural factors such as tariffs and data distortions complicate the outlook for monetary policy. The Consumer Price Index CPI released last Friday, February 13, showed that inflation rose 2.4 percent in January from a year earlier, down from 2.7 percent in December. On a monthly basis, prices increased 0.2 percent. Core inflation, which excludes food and energy to provide a clearer view of underlying trends, rose 0.3 percent in the month and 2.5 percent over the year. The moderation in headline inflation was largely driven by energy prices, which fell 1.5 percent in January, including a 3.3 percent decline in energy commodities and a 3.2 percent drop in gasoline prices. Gasoline was down about 3 percent on the month and 7.5 percent from a year ago. Used car and truck prices also declined 1.8 percent, contributing to softer transportation costs. However, not all categories improved. Services prices increased 0.4 percent in January and were up 3.2 percent year-on-year. Services account for roughly 64 percent of the CPI basket, meaning movements in this category carry significant weight. Food and beverages increased 0.2 percent in January and 2.8 percent from a year earlier. Electricity and home heating costs remained elevated despite broader energy weakness.