Rise in core consumer prices stokes inflation fears
WASHINGTON — U.S. consumer prices, excluding the volatile food and energy categories, rose 0.3 per cent last month. That was the biggest climb in a year and has intensified inflation fears in financial markets.
Overall consumer prices rose 0.5 per cent in January, the most in four months, the Labor Department said Wednesday. Inflation rose 2.1 per cent from a year earlier and core prices increased 1.8 per cent. The increases were led by much higher clothing costs and more expensive car insurance.
Both measures show that inflation is mostly contained, but the increase in core prices will likely make investors nervous. Analysts are hyper-focused on whether faster price increases may cause the Federal Reserve to raise short-term interest rates faster than expected. Higher interest rates make it more expensive for consumers and businesses to borrow and spend and could slow growth.
“We think the increase in core inflation is a sign of things to come over the rest of the year,” said Michael Pearce, U.S. economist at Capital Economics.