A key inflation measure showed that prices are climbing at the fastest pace in 40 years and more quickly than economists had expected.
Consumer Price Index data for January, released Thursday, showed that prices have climbed 7.5 percent over the past year, more than the 7.2 percent projected in a Bloomberg survey. On a monthly basis, they picked up 0.6 percent. That is rapid by historical standards, and although it is slower than the fastest monthly increases in 2021, it too was above economists’ expectations.
After stripping out food and fuel — the prices of which move around a lot from month to month — inflation climbed 6 percent, the fastest pace since 1982.
The increases were driven by food, electricity and shelter costs, the Bureau of Labor Statistics said.
Forecasters anticipate that inflation will come down meaningfully in 2022: Many expect it to finish the year closer to 3 percent. But economists regularly predicted that price gains would fade quickly in 2021, only to have those projections foiled as booming consumer demand for goods collided with roiled global supply chains that could not ramp up production fast enough.
Policymakers have expressed more humility around the outlook for inflation in recent months, especially at a time when ports remain clogged, rents and restaurant prices are on the upswing and wages are rising, all factors that could keep inflation hot.
High inflation has been a political liability for the White House, because rising prices have eaten away at household paychecks and detracted from a strong labor market with solid wage growth, leaving consumers feeling pessimistic. It has also prompted the Fed to pivot away from its patient policy setting meant to foster a quick economic rebound from the pandemic, including keeping interest rates at rock bottom. Investors now expect that central bankers might lift interest rates six times this year as they try to slow down the economy and tamp down price gains.
“Making appropriate monetary policy in this environment requires humility, recognizing that the economy evolves in unexpected ways,” Jerome H. Powell, the Fed chair, said at his news conference last month.
The Fed aims for 2 percent inflation on average over time, though it defines that target using a different inflation index that is also elevated but not quite as sharply.
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