US consumer prices rise from rent;  Inflation is slowly cooling down

US consumer prices rise from rent; Inflation is slowly cooling down

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“In today’s high-inflation environment, firms are more likely to implement large price increases when they reset their prices, when inflation was low and stable, with seasonal factors leading to lower inflation at the beginning of the year.” occur when price resetting is more common,” economists at Goldman Sachs wrote in a note.

The Department of Labor’s Bureau of Labor Statistics (BLS) also updated seasonal adjustment factors, the model it uses to remove seasonal fluctuations from the data.

The expenditure weights used to calculate the CPI were also updated with the January report. The new weight seen in the January report on consumer spending projected in 2021 is inflation. Housing now has a larger share in the CPI, while the weightings for transportation and food were reduced.

In the 12 months to January, CPI increased by 6.4%. This was the smallest gain since October 2021 and a 6.5% increase in December. The revision in the 2022 CPI accounts for a slight slowdown in the year-on-year CPI.

The annual CPI rose to 9.1% in June, the biggest increase since November 1981.

President Joe Biden said in a statement that the CPI report “confirms that we have made historic progress and are on the right track, and now we need to finish the job.”

Wall Street stocks were trading lower. The dollar was stable against a basket of currencies. US Treasury prices fell.

deflation of goods stops

The softening of annual inflation reflects tighter monetary policy, which is weighing on demand, as well as improvements in the supply chain. But it will take some time for inflation to return to the Fed’s 2% target.

The Fed has raised its policy rate by 450 basis points since last March, to a range of 4.50%-4.75% from near zero, with the bulk of the increases between May and December. Two additional rate hikes of 25 basis points are expected in March and May. Financial markets are betting on another hike in June.

“There are risks to further rate hikes,” said Cathy Bosjancic, chief economist at Nationwide.

Excluding the volatile food and energy components, the CPI rose 0.4% after rising 0.4% in December. In addition to the 0.7% advance in owners’ equivalent rent (OER), a measure of the amount homeowners pay in rent or earn from renting out their property, the so-called core CPI was also supported by higher prices for apparel. I went. The OER rose 0.8% in December.

Independent measures, however, suggest that rental inflation is moderating, leading many economists to believe that price pressures could ease significantly in the second half. The fare measures in the CPI lag behind the independent gauges.

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