The cost of living eked up ever-so-slightly in January.
Rising rents and medical costs lifted underlying U.S. inflation last month by the most in nearly four and a half years, signs of an uptick in price pressures that could allow the Federal Reserve to gradually raise interest rates this year.
The U.S. Labor Department said on Friday its Consumer Price Index, excluding the volatile food and energy components, increased 0.3% last month. That was the biggest gain since August 2011 and followed a 0.2% rise in December.
In the 12 months through January, the core CPI advanced 2.2%, the largest rise since June 2012. The CPI had increased 2.1% in December. The Fed has a 2% inflation target and monitors a price measure that is running well below the core CPI.
Economists had forecast core CPI up 0.2% last month and increasing 2.1% from a year ago.
Inflation is being watched for clues on whether central bankers would continue raising interest rates this year after the Fed lifted borrowing costs in December for the first time in nearly a decade.
Tighter financial market conditions in the wake of a recent sharp stock market selloff and slowing domestic and global growth have almost wiped out bets for a March rate increase.
Signs of a pickup in underlying inflation are likely to be welcomed by Federal Reserve officials, but significant gains remain a challenge against the backdrop of very low inflation expectations by households.
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