Inflation surges to 3% in January

Inflation rose more than expected in January, complicating President Donald Trump’s economic agenda. The Consumer Price Index (CPI) climbed 3% from a year earlier, up from December’s 2.9%, according to the Labor Department.

Core inflation, which excludes food and energy, increased 3.3%.

Compared to last month, overall consumer prices rose 0.5%, the biggest increase since August 2023 and above the analysts’ expectations of 0.3%. Higher food, fuel and auto insurance drove up consumer prices.

Rising prices hit consumers
Grocery prices rose 0.5%, the largest monthly gain since October 2022, with egg prices soaring 15.2% due to a bird flu outbreak. 

Over the past year, egg prices have gone up 53%.

Shelter costs, making up nearly 30% of the CPI, increased 0.4%. Gas prices climbed 1.8%, while vehicle insurance surged 2% for the month and ~12% for the year.

Fed holds rates, markets react
The inflation data pushed the Federal Reserve to maintain its pause on interest rate cuts. At his congressional hearing yesterday, Fed Chair Jerome Powell indicated that the central bank is in no rush to cut rates.

Stocks fell, and bond yields spiked as investors adjusted their expectations.

Political and economic impact
Trump, who had promised to lower prices, blamed the Biden administration for inflation but now faces potential political backlash.

Economists warn that the president’s trade and immigration policies could further fuel inflation. Tariffs on China and new deportation measures may lead to higher costs, complicating efforts to control prices.

The Fed is cautious about cutting rates early, fearing sustained inflationary pressure.