Biden’s Inflation Unexpectedly Surges In January

In a development that may signal a warning to the Federal Reserve about lowering interest rates, consumer prices in January rose an unexpected 3.1%. While that was lower than December’s 3.4%, it came in hotter than the predicted 2.9%.

Even worse for the White House was the news that excluding volatile food and energy prices, the inflation surge was 3.9%.

The Fed is notoriously skittish about lowering interest rates after 11 consecutive increases. Act too soon, and the inflation fire the central bank attempted to put out would blaze yet again.

One expert, Omair Sharif of Inflation Insights, contended the Fed was correct in taking a patient path toward bringing interest rates back down. He called the January news “a spooky number” and wondered if inflation is truly on a downward track.

Fed Chair Jerome Powell made a similar observation at the end of January. “Is it sending us a true signal that we are, in fact, on a path — a sustainable path — down to 2% inflation? That’s the question.”

That 2% rate is the central bank’s target number, and the January bounce brought uncertainty that it is currently within reach.

The Fed previously indicated a likelihood of three interest rate decreases in 2024. But bankers largely dismissed the possibility of the first coming out of the March meeting, and January’s figures likely pushed that chance even lower.

The bulk of the January increase came from shelter costs. The burden of housing and its related expenses climbed 0.6% for the month, which constituted more than two-thirds of the total jump.

Over a 12-month span, shelter rose 6%.

Food prices fared little better as the index rose 0.4% for January. This continued the trend of much higher grocery store costs over the past three years.

Last month’s inflation numbers would have come in significantly worse without a 3.3% dip in gasoline prices. This fueled the energy sector’s 0.9% decline in costs.

Lisa Sturtevant of Bright MLS noted that inflation is overall moving in the desired direction. “But it’s important to remember that a lower inflation rate does not mean that prices of most things are falling — rather, it simply means that prices are rising more slowly.”

In other words, average Americans still feel the sharp pinch of Biden’s inflationary economy.