New Inflation Report Is a Disappointment

Annual inflation in the United States cooled last month, but not as much as expected, the latest sign that the pandemic-fueled price surge is only gradually and fitfully coming under control, per the AP.

• The numbers: Tuesday's report from the Labor Department showed that the consumer price index rose 0.3% from December to January. Compared with a year ago, prices are up 3.1%. Economists expected figures of 0.2% and 2.9%, respectively, reports the Wall Street Journal. The latter, getting under 3%, would have been a welcome milestone.
• Markets: Wall Street is not happy with the higher-than-expected numbers: Dow futures fell more than 300 points when the report came out, notes CNBC.
• Context: The annual 3.1% figure is less than the 3.4% in December and far below the 9.1% inflation peak in mid-2022. Yet the latest reading is still well above the Federal Reserve's 2% target level at a time when public frustration with inflation has become a pivotal issue in President Biden's bid for re-election.

• Core prices: Excluding the volatile food and energy categories, so-called core prices climbed 0.4% last month, up from 0.3% in December and 3.9% over the past 12 months. Core inflation is watched closely because it typically provides a better read of where inflation is likely headed. The annual figure is the same as it was in December. Analysts expected lower figures of 0.3% and 3.7%.
• The Fed: The mixed data released Tuesday could reinforce the caution of Fed officials, who have said they're pleased with the progress in sharply reducing inflation but want to see further evidence before feeling confident that it's sustainably headed back to their 2% target. Most economists think the central bank will want to wait until May or June to begin cutting its benchmark rate from its 22-year-high of roughly 5.4%.

(More inflation stories.)