Consumer Prices Rose 0.5% in January

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What happenedThe Bureau of Labor Statistics just released its latest Consumer Price Index (CPI) reading, and it showed that consumer prices rose 0.5% from December to January. On an annual basis, the index was up 6.4%, which was slightly lower than December’s annual 6.5% increase. So whatThe Bureau of Labor Statistics initially reported a 0.1% decline in consumer prices from November to December. It then adjusted that figure to show a 0.1% month-over-month increase. But either way, January’s 0.5% jump from December is far more substantial. And that could pave the way for more aggressive interest rate hikes on the part of the Federal Reserve.Inflation has slowed since peaking in mid-2022. But we’re a long way off from where the Fed wants inflation to be, which is in the 2% range. “We’re certainly down from the peak of inflation pressures last year, but we’re lingering at an elevated rate,” said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives. “The road back to 2% is going to take some time.”Now whatGiven that the Fed may not be so pleased with this recent CPI reading, consumers will need to brace for the possibility of a more aggressive interest rate hike the next time the central bank meets. Rate hikes have already driven up the cost of consumer borrowing across different categories, from credit cards to auto loans to home equity loans and lines of credit. And if the Fed’s next hike is substantial, borrowers might run into even more issues with affordability.There’s also the issue of higher living costs to grapple with. Many people’s paychecks just aren’t going as far, given the way expenses are rising. Those struggling to keep up with their bills may want to look to the gig economy. It’s booming, and picking up gig work is a good way to shore up your savings account balance and carve out more financial breathing room at a time when living costs are so burdensome.Cash-strapped consumers can also look into any government assistance programs they may be eligible for. Programs like SNAP can make it easier to put food on the table at a time when groceries have gotten expensive. In fact, in January, the cost of food at home rose 0.4% from December and was up 11.3% on an annual basis, so getting help with that specific expense could go a long way.Alert: highest cash back card we’ve seen now has 0% intro APR until 2024If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee. In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes. Read our free reviewWe’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy. 

What happened

The Bureau of Labor Statistics just released its latest Consumer Price Index (CPI) reading, and it showed that consumer prices rose 0.5% from December to January. On an annual basis, the index was up 6.4%, which was slightly lower than December’s annual 6.5% increase.

So what

The Bureau of Labor Statistics initially reported a 0.1% decline in consumer prices from November to December. It then adjusted that figure to show a 0.1% month-over-month increase.

But either way, January’s 0.5% jump from December is far more substantial. And that could pave the way for more aggressive interest rate hikes on the part of the Federal Reserve.

Inflation has slowed since peaking in mid-2022. But we’re a long way off from where the Fed wants inflation to be, which is in the 2% range.

“We’re certainly down from the peak of inflation pressures last year, but we’re lingering at an elevated rate,” said Laura Rosner-Warburton, senior economist at MacroPolicy Perspectives. “The road back to 2% is going to take some time.”

Now what

Given that the Fed may not be so pleased with this recent CPI reading, consumers will need to brace for the possibility of a more aggressive interest rate hike the next time the central bank meets. Rate hikes have already driven up the cost of consumer borrowing across different categories, from credit cards to auto loans to home equity loans and lines of credit. And if the Fed’s next hike is substantial, borrowers might run into even more issues with affordability.

There’s also the issue of higher living costs to grapple with. Many people’s paychecks just aren’t going as far, given the way expenses are rising.

Those struggling to keep up with their bills may want to look to the gig economy. It’s booming, and picking up gig work is a good way to shore up your savings account balance and carve out more financial breathing room at a time when living costs are so burdensome.

Cash-strapped consumers can also look into any government assistance programs they may be eligible for. Programs like SNAP can make it easier to put food on the table at a time when groceries have gotten expensive. In fact, in January, the cost of food at home rose 0.4% from December and was up 11.3% on an annual basis, so getting help with that specific expense could go a long way.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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