The rate of US inflation is continuing to cool but not at a quick enough rate to change the Fed’s planned course of action.

The Consumer Price Index (CPI) increased 6.4% in January over the last 12 months, according to the latest report released last week by the Bureau of Labor Statistics, which is slightly less than December’s CPI of 6.5%. On a month to month basis, CPI rose 0.5% in January following a 0.1% increase in December. Originally, BLS’ December report had indicated that there was a 0.1% CPI decrease until the report was revised.

Increases in shelter, food and energy on a monthly basis were the prime factors for the rather slow decline in the rate of inflation, according to the report. That, coupled with a robust labor market and continued wage increases in various job sectors, mean the CPI is still percentage points away from the Fed’s ideal inflation rate of 2%. Increased interest rates are all but likely.

“It looks more like the Fed’s going to tighten (the economy) at least in March,” if not further into the year, Michael R. Englund, chief economist of Action Economics said, referring to increased interest rates.

Englund noted that numbers from the latest CPI report were almost on par with economists’ predictions, albeit slightly higher.

“There’s some firmness in the data,” he said.

Shelter was the largest contributor to the monthly all items increase, according to the report, followed by food and energy. The food index and energy index rose at 0.5% and 2% respectively last month while core CPI – the index with food and energy prices taken out, given the volatility of those items – rose 0.4% in January.

On the other hand, prices for used vehicles and medical care services dropped by 1.9% and 0.7% respectively compared to last month.

For the seventh straight month in a row, the rate of inflation continued to decelerate from June, when the CPI that month over the last year hit 9.1%. The CPI report for January indicated that the latest rate of inflation decline on a yearly basis was nominal, according to Jonathan Millar, senior US economist with Barclays Investment Bank.

“Yes, inflation is coming down, but really not in a way that we view as sustainable because of the strong labor market,” he said. The latest job report, also measured and released by BLS earlier this month, showed an increase of 517,000 added jobs in January, far surpassing many economists’ predictions.

Coinciding with that are wage increases, Millar added.

“Wages are increasing at much too high a rate to be consistent with an eventual return to 2% inflation. Right now, depending on the measure that you look at, wages are increasing anywhere between 4.5% to 5% year over year,” he said. “We have to see that number somewhere no higher than maybe 3.5% for wage increases” to get back to 2% inflation, Millar said.