U.S. consumer prices rose by more than projected in January as apparel costs jumped the most in nearly three decades, adding to signs of an inflation pickup that have roiled financial markets this month.
The consumer price index rose 0.5% from the previous month, above the median estimate of economists for a 0.3% increase, a Labor Department report showed Wednesday. Excluding volatile food and energy costs, the so-called core gauge increased 0.3%, also above forecasts for 0.2%. It was up 1.8% from a year earlier, higher than the 1.7% estimate.
The figures may renew investor concerns that the Federal Reserve will raise interest rates at a faster pace than anticipated, after wage figures earlier this month sent Treasury yields spiking and started a rout in equities that pushed them into the first correction in two years. The 1.7% monthly gain in apparel prices, which account for about 3% of the CPI, was the biggest since 1990.
Other items contributing to the gain in CPI included rents and owners’ equivalent rent, which both rose 0.3% from December; medical care, up 0.4 percent; and motor vehicle insurance, which advanced 1.3%, the most since 2001.
The increase in the core CPI brought the three-month annualized gain to 2.9% perent, the fastest since 2011, according to data compiled by Bloomberg.
While economists and investors have seen a Fed interest-rate hike in March as a near-certainty, the details of the latest CPI report could play a role in the timing and number of rate increases throughout 2018.
The central bank’s preferred gauge of inflation — a separate figure based on consumer purchases and issued by the Commerce Department — has mostly missed its 2% goal in the past five years. The measure excluding food and energy is also below the Fed’s target. January data are due for release on March 1.
Fed policy makers will also have February CPI data in hand before they next meet March 20-21 in Jerome Powell’s first gathering as chairman. Powell, speaking Tuesday at his ceremonial swearing-in, suggested that the central bank would push ahead with gradual interest-rate increases, and that officials “remain alert to any developing risks to financial stability.”
