Statistics at a Glance
The Consumer Price Index was predicted to rise by 2.9% last month, according to economists surveyed by FactSet. The CPI tracks the price changes in a basket of goods and services commonly purchased by consumers.
On a monthly basis, CPI increased by 0.5%, exceeding economists’ expectations of a 0.3% rise, as per FactSet. This represents the largest monthly increase since August 2023 and may reflect early-year price adjustments set by various businesses, as noted by Bright MLS chief economist Lisa Sturtevant in a recent email.
The report indicates that the following items experienced price hikes on a month-over-month basis:
- Eggs: 15.2%
- Fuel oil: 6.2%
- Used cars and trucks: 2.2%
- Auto insurance: 2%
Insights from Economists
Recent persistent inflation data supports the Federal Reserve’s choice last month to pause rate cuts, according to economists. On February 11, Fed Chair Jerome Powell informed the Senate Banking Committee that the central bank does not need to act hastily in reducing rates.
“This data is not encouraging,” remarked Brian Coulton, chief economist at Fitch Ratings, in an email concerning January’s CPI figures. “It resembles a re-run of the first half of 2024, during which inflation surprised everyone, including the Fed, by rising unexpectedly.”
He added, “This illustrates that the Fed has not yet completed the task of bringing inflation down, especially as new inflationary pressures—like tariff increases and constraints on labor supply—begin to emerge.”
New data indicate inflation gained momentum at the commencement of President Trump’s second administration, which has expressed intentions to impose broad tariffs, including recently announced 25% tariffs on all steel and aluminum imports.
Tariffs act as taxes on imports that are generally handed down to U.S. consumers. Therefore, if Mr. Trump’s import duties are implemented, economists predict that inflation could rise further in 2025.
Implications for your finances
Prolonged high borrowing costs: With the Fed halting rate cuts, consumers can expect to see higher costs for loans and other debts, such as credit cards and auto loans.
“The stronger-than-expected CPI release today is likely to further solidify the Federal Reserve’s cautious stance towards easing,” stated Whitney Watson, global co-head and co-chief investment officer of fixed income and liquidity solutions at Goldman Sachs Asset Management, in an email. “We believe the Fed will likely adopt a ‘wait and see’ strategy for the time being and expect them to remain on hold at next month’s meeting.”
Furthermore, mortgage rates may not decrease anytime soon. Despite cuts from the Fed in 2024, mortgage rates remain near 7%, close to a 20-year peak. The trajectory of mortgage rates does not closely align with the Fed’s rate cuts, as they are influenced by both economic data and the 10-year Treasury yield.
“Improvements in mortgage rates are only anticipated when inflation is under control,” highlighted Lawrence Yun, chief economist of the National Association of Realtors, in an email.
