January’s Consumer Price Index (CPI) saw inflation rise by 0.5% month-over-month and 3.0% year-over-year, as reported by the US Bureau of Labor Statistics (BLS), above economist estimates for 0.3% monthly and 2.9% annually.
One particular caveat to this hotter-than-expected inflation print is “this is the month of January, lots of businesses raised prices during this month. [The] BLS… the keeper of the data, tries to seasonally adjust to account for that dynamic. But it’s difficult to do so,” Moody’s Analytics chief economist Mark Zandi tells Seana Smith and Brad Smith on the Morning Brief.
“This may overstate the case. But… I think there is a case here that that disinflation we’ve been enjoying, the slowing in the rate of growth of inflation that we’ve been enjoying since really since the summer of 2022, may, may now be coming to an end.”
Zandi emphasizes the “broad-based nature” of price increases across not only egg prices (tied to avian flu outbreaks) but also drug and gasoline (RB=F) costs. The economist shares his thoughts on what this stickier inflation data means for the Federal Reserve’s next interest rate cut decision. Fed Chair Jerome Powell stated in Tuesday’s testimony to US lawmakers that the central bank has no intentions to rush to adjust rates.
Zandi points to uncertainties tied to President Trump’s tariffs and deportation policies as factors that may cause confusion for the Fed’s dual mandate goals, “[suggesting] higher rates, but it also weakens growth which suggests lower rates are kind of in between and betwixt. You don’t know what to do.”
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