Consumer prices ticked up sharply in January, foreshadowing that inflation will continue to be a thorn in the side of President Donald Trump as he begins his second term.
The Consumer Price Index registered a 3% increase year-over-year, the Bureau of Labor Statistics reported on Wednesday, well above the Federal Reserve’s target rate of 2%. Prices rose 0.5% from December, an increase of 0.1 percentage point and the highest month-on-month increase since June 2023.
The numbers were higher than many analysts predicted and represent a setback in the Federal Reserve’s efforts to tamp down inflation. The report, which examines price increases in January, will also no doubt be a point of frustration for President Donald Trump, who won last year’s election on big promises to fight inflation and bring down prices for Americans.
“Inflation is a little bit sticky and likely to be a problem going forward,” said Stephanie Roth, chief economist at Wolfe Research.
“It’s a bit of a problem,” said Kathy Bostjancic, chief economist at Nationwide Mutual, “because what we saw is the improvement that was stalling has now done a U-turn.” She sees this as a worrying sign for the year ahead.
Increases in food prices played a large role in the inflation numbers. The food at home index was up .05%, with egg prices specifically shooting up more than 15% from just a month ago. The increase was caused by a nationwide outbreak of bird flu, a problem that experts anticipate will continue into the coming months.
The report pours cold water on hopes for a near-term rate cut from the Federal Reserve. On Tuesday, in testimony before the Senate Banking Committee, Jerome Powell, chair of the Federal Reserve, signaled that the central bank is comfortable with letting rates remain where they are.
“We do not need to be in a hurry to address our policy stance,” he said, noting that the labor market conditions are strong and inflation, while higher than the bank’s goal of 2%, has eased.
Roth predicted that the Fed won’t look to lower rates until at least May. “Even then it will be an issue,” she said.
This is unlikely to sit well with President Donald Trump, who has repeatedly pushed publicly for the Fed to lower rates. On Wednesday morning, he again took to Truth Social to push for the Fed to cut rates.
“Interest Rates should be lowered, something which would go hand in hand with upcoming Tariffs!!!” he said. “Lets Rock and Roll, America!!!”
President Trump’s push for increased tariffs may also complicate things. On Monday, the President put a 25% tariff on all steel and aluminum imports, and he’s promised more tariffs in the coming days and weeks. Economists worry this could add to inflationary pressures by raising prices.
“Most of the prices get passed on to consumers,” said Bostjancic. “They will appear in products that use a lot of steel and aluminum.”