US inflation eases to 6.4% but price pressures linger

7th straight year-over-year slowdown stays far above Fed’s 2% annual target

WASHINGTON — The pace of consumer price increases eased again in January compared with a year earlier, the latest sign that the high inflation that has gripped Americans for nearly two years is slowly easing.

At the same time, Tuesday’s consumer price report from the government showed that inflationary pressures in the U.S. economy remain stubborn and are likely to keep prices elevated well into this year. Rising costs will also keep pressure on the Federal Reserve to further raise its benchmark interest rate.

Consumer prices climbed 6.4% in January from a year earlier, down from 6.5% in December. It was the seventh straight year-over-year slowdown and well below a recent peak of 9.1% in June. Yet it remains far above the Federal Reserve’s 2% annual inflation target.

And on a monthly basis, consumer prices increased 0.5% from December to January, much higher than the 0.1% rise from November to December. More expensive gas, food and clothing drove up last month’s figure.

The data show that while inflation is fading, it is likely to do so slowly and unevenly. The government also incorporated annual revisions of its methods into January’s inflation report, which caused monthly increases in the final three months of last year to be higher than originally reported. Combined with January’s price figures, the slowdown in inflation since the fall is now more gradual than it seemed just a few weeks ago.

Excluding volatile food and energy costs, so-called core prices increased 0.4% last month, up from 0.3% in December. Core prices rose 5.6% from a year ago, down just a tick from December’s 5.7%.

In the past three months, core prices have risen at a 4.6% annual rate, which is below the year-over-year number and suggests that more declines are coming. But that figure is up from 4.3% in December.

Fed Chair Jerome Powell said last week that the “process of getting inflation down has begun.”

But “this process is likely to take quite a bit of time,” he added. “It’s not going to be, we don’t think, smooth, it’s probably going to be bumpy.”

The Fed has aggressively raised its benchmark interest rate in the past year to its highest level in 15 years in its drive to get rampaging inflation under control. The Fed’s goal is to slow borrowing and spending, cool the pace of hiring and relieve the pressure many businesses feel to raise wages to find or keep workers. Businesses typically pass their higher labor costs on to their customers in the form of higher prices, thereby helping fuel inflation.

Used car prices, which had soared in 2021 and early last year amid widespread supply disruptions, dropped 1.9% last month, the seventh straight decline. They’re now 11.9% lower than they were a year ago.

Gas prices rose 2.4% in January, the government said, with prices averaging $3.50 a gallon nationwide by the end of last month.