January Inflation - Onward and Upward

Consumer prices are 7.5% higher than they were a year ago – slightly higher than forecast and the highest level reported in nearly 40 years.  The writing was already on the wall, but when you couple these persistent elevated levels of inflation with the labor market strength we discussed last week, it leaves absolutely no doubt that fed policymakers will proceed with rate increases next month and several more to come this year.  That may sound obvious, but you have to appreciate that this is a dramatic shift from the policy timelines projected as recently as a few months ago.  Looking forward, we continue to believe tighter monetary policy, in addition to normalizing demand, supply chain recovery, and increasingly tough comparisons can support moderating inflation levels as we work our way through the year.

• Consumer prices (CPI) increased 7.5% year-over-year, exceeding forecasts.  In January, the consumer price index (CPI) increased 7.5% compared to the same period a year ago.  Expectations ranged from 7.0% to 7.6% with a median of 7.3%.  Core CPI (excludes food and energy) increased 6.0% year-over-year.  While price increases were broad-based, Energy costs (+27%) and new and used vehicles (+12% and +41%) were among the larger contributors to the year-over-year change.
• Consumer prices (CPI) increased 0.6% month-over-month.  In January, consumer prices as measured by CPI increased 0.6% compared to December.  Expectations ranged from 0.2% to 0.7% with a median of 0.4%.  Used car and truck prices (+1.5%), food (+0.9%) and energy (+0.9%) were among the largest contributors.