Inflation edges up 0.4% in January on surging prices for groceries, gas
WASHINGTON (AP) — Inflation rose 0.4% in January, a slight tick up from December, as surging prices for groceries, gas and housing drove the sharpest annual increase in consumer inflation in nearly four decades.
The January increase in wholesale prices, which followed a 0.3% rise in December, was led by a 1.6% jump in food costs, the Labor Department reported Friday. Gas prices rose 6.4%, while home heating oil increased 6.9%.
Over the past year, consumer inflation has increased 7.5%, the biggest 12-month gain since February 1982. Core inflation, which excludes volatile food and energy prices, rose 6% in January from a year earlier, the sharpest increase since August 1982.
Low borrowing costs and a strong rebound from the pandemic-induced recession have lifted consumer spending. The Federal Reserve has signaled it’s closely watching inflation as it considers when to begin raising interest rates to cool the economy. Fed policymakers have outlined plans to begin raising rates as soon as March.
The government’s report Friday on its producer price index showed that wholesale prices increased 9.7% in January from a year earlier, the biggest jump on records dating to 2010. Core wholesale prices increased 9%, also a record high.
A sharp rise in inflation could force the central bank to raise rates to slow borrowing and spending, potentially triggering a recession. But some policymakers believe that factor driving the current inflation increase are unlikely to last and that inflation will moderate on its own.
Some economists say that the Omicron variant of COVID-19 disrupted supply chains and contributed to the recent increases in inflation. Supply chain disruptions have made it difficult for companies to produce and deliver goods, leading to higher prices for consumers.
Despite the recent surge in inflation, many economists are optimistic that it will ease in the coming months as supply chain issues are resolved and demand slows.