U.S. inflation cools to 3.1%. What this could mean for interest rates

globalnews.ca:

Consumer inflation in the United States cooled last month yet remained elevated in the latest sign that the pandemic-fueled price surge is only gradually and fitfully coming under control.

Tuesday’s report from the Labor Department showed that the consumer price index rose 0.3% from December to January, up from a 0.2% increase the previous month. Compared with a year ago, prices are up 3.1%.

That is less than the 3.4% figure in December and far below the 9.1% inflation peak in mid-2022. But the latest reading is still well above the Federal Reserve’s 2% target level at a time when public frustration with inflation has become a pivotal issue in President Joe Biden’s bid for re-election.

Excluding volatile food and energy costs, so-called core prices climbed 0.4% last month, up from 0.3% in December. On a year-over-year basis, core prices were up 3.9% in January, the same as in December. Core inflation is watched especially closely because it typically provides a better read of where inflation is likely headed.

Biden administration officials frequently note that inflation has plummeted since pandemic-related supply disruptions and significant government aid sent it soaring three years ago. And a raft of forward-looking data suggests that inflation will continue to cool.

Still, even as it nears the Fed’s target level, many Americans remain exasperated that average prices are still about 19% higher than they were when Biden took office.

From December to January, average national gas prices tumbled 3.3%, the government said. Yet so far this month, the average price has climbed higher, rising 15 cents to $3.23 a gallon as of Tuesday, according to AAA.

Grocery prices rose 0.4% from December to January, the biggest such rise in