Inflation stayed hot in January
Consumer prices continued rising rapidly as the year began, according to new government data that show no sign of U.S. inflation pressures abating.
Driving the news: The inflation measure preferred by the Federal Reserve, known as the personal consumption expenditures (PCE) price deflator, rose 0.6% in January, or 0.5% when volatile food and energy are excluded.
- Over the last 12 months, the index was up 6.1% (5.2% excluding food and energy), a new four-decade high.
A rosy view of the numbers is that they do not suggest an upward spiral in the rate of inflation. Core PCE inflation has risen 0.5% for four straight months.
- The less rosy view is that high inflation is well-entrenched and not going away anytime soon.
- If sustained for a full year, 0.5% monthly inflation would translate to 6.2% annual inflation, due to compounding — far above the 2% the Fed aims for.
The new numbers from the Commerce Department also showed a mere 0.1% gain in Americans' disposable income, which translates to a decline of 0.5% after accounting for higher prices.
- This measure, real disposable personal income, has been in negative territory every month since August. That helps explain the seeming conundrum of a strong job market and poor public opinion polling on the economy.
The bottom line: There is plenty of time for inflation to recede in 2022. But it didn't start happening in January.