From Investing.com: 2025-02-18 02:25:00

In January, the CPI rose by 0.47%, exceeding expectations, but excluding food and energy, the increase was only 0.45%. This raises concerns about inflation for the year, but it’s important to stay calm and not overreact to one month of data. Last year, core CPI slowed despite a hot start, so it’s too early to predict inflation trends for 2025. Although January saw some price surges, it’s likely due to special factors, not broad-based causes. The PCE inflation measure for January is expected to be more moderate at 0.25%, offering a different perspective on inflation.

While January’s CPI data is concerning, it’s part of a trend where core CPI has been elevated for the past six months. The surprising heat in January may not be just a statistical artifact and could signal stalled disinflation. There are concerns about the accuracy of seasonal adjustments and residual seasonality in the data. Despite these challenges, it’s important not to overreact to hot months early in the year. The latest data suggests that disinflation is stalling, with core CPI still above the Fed’s target of 2%.

The January CPI highlights the risks of inflation from economic policies like tariffs. Businesses have shown they can pass on higher costs to consumers, leading to potential price increases due to new cost shocks. The Trump administration’s tariff policies could have a significant impact on consumer prices this year. Consumers are already expecting tariffs to boost inflation, which could become a self-fulfilling prophecy. The bigger concern is that businesses with pricing power will pass on the full cost of tariffs to consumers, further fueling inflation.



Read more at Investing.com: Inflation: Just How Worried Should We Really Be?