January inflation outpaces forecasts
Housing accounts for nearly half the hike as monthly report puts damper on markets
Inflation won’t go down without a fight, the Labor Department reported Tuesday.
The consumer price index rose 0.5 percent in January, putting inflation over the past twelve months at 6.4 percent. Core CPI, a measure that excludes historically volatile food and energy prices, rose 0.4 percent to an annual rate of 5.6 percent.
Housing was the key culprit, accounting for nearly half of the monthly increase. Rising prices of food, gasoline and natural gas also played a significant role, the Labor Department said.
The top-line number, 6.4 percent, means inflation has cooled slightly since December, when the annual rate was 6.5 percent, and significantly since last summer, when inflation hit 45-year highs around the country and double digits in the Houston area.
But the monthly increase was greater than economists expected, putting markets in a slightly sour mood Tuesday and reinforcing the impression that the Federal Reserve will continue to battle inflation with interest-rate hikes.
Fed Chair Jerome Powell reiterated last month that policymakers are aiming to return inflation to a rate of 2 percent.
Bill Demchak, CEO of the PNC Financial Services Group, said on Tuesday that PNC is still forecasting a mild recession.
“Chair Powell has been really consistent that it’s going to be a bumpy ride,” said Demchak, who was in Houston for a board meeting and town hall with PNC’s Houston-based employees. “I think today just confirms that.”
However, he noted, the labor market is likely to remain tight even if the economy slows, meaning households might not feel the pain of previous recessions. Unemployment is 3.4 percent across the country and 3.9 percent in the Houston area.
“We think about recession — technically, they say two quarters of low GDP, but that was always when we had excess labor supply,” Demchak said. “We have no labor supply today. So you can get into a period where we have full employment and GDP shrinks, and that doesn’t feel so bad to me.”