Core inflation rose by the most in over four years in January, by 0.3%.
“Core” inflation excludes the volatile costs of food and energy.
Core services prices jumped 3%, while medical costs rose 3.3%. There were also increases in the costs of cars, clothes and rent.
An increase in core inflation offset a decline in the energy index, causing the headline consumer price index (CPI) to be flat, according to the Department of Labour.
Headline CPI beat the forecast for a 0.1% decline.
Gus Faucher, PNC deputy chief economist, noted that “more importantly, both overall and core inflation are picking up on a year-over-year basis. Broad-based price growth is signalling that the wage and price pressures are building, an indication that the economy is expanding at a solid pace and that recessionary concerns are overdone.”
And so these data could provide a bit of comfort for the Federal Reserve, which is betting that the factors keeping inflation away from its 2% target — like low gas prices — are transitory. The Fed, however, focuses more on personal consumption expenditures as a measure of inflation.
Compared to the prior year, CPI rose 1.4% (1.3% expected).
Core CPI rose 2.2% year-on-year, beating the estimate for a 2.1% increase.