Services drive US prices higher in January; inflation gradually cooling
By Lucia Mutikani
WASHINGTON (Reuters) -U.S. prices picked up in January amid strong gains in the costs of services, but the annual increase in inflation was the smallest in three years, keeping a mid-year interest rate cut from the Federal Reserve on the table.
The report from the Commerce Department on Thursday also showed consumer spending slowed last month, restrained by decreases in outlays on goods, including motor vehicles, furniture and other long-lasting household equipment. The inflation and consumer spending readings were in line with economists' expectations.
But with services prices increasing a solid 0.6% last month, likely as businesses raised prices at the start of the year, the timing of the first Fed rate cut remains uncertain. Services, which include housing and healthcare, are at the heart of the U.S. central bank's fight against inflation. Policymakers have said they are in no rush to start lowering borrowing costs.
«The economy is not going off the rails and the inflation scare in January seems unlikely to continue, so Fed officials are still likely to consider a first interest rate cut when they meet in June,» said Christopher Rupkey, chief economistat FWDBONDS in New York.
The personal consumption expenditures (PCE) price index rose 0.3% last month, the Commerce Department's Bureau of Economic Analysis said. Data for December was revised lower to show the PCE price index gaining 0.1% instead of 0.2% as previously reported. Goods prices fell 0.2% as the cost of energy dropped 1.4%, offsetting a 0.5% rise in food prices.
In the 12 months through January, PCE inflation rose 2.4%. That was the smallest year-on-year increase since February 2021 and followed a 2.6% advance in December.
The monthly
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