Inflation rose more than expected in January as persistently high home prices weighed on consumers, the Labor Department reported Tuesday.
The consumer price index, a broad measure of the prices faced by buyers of goods and services throughout the economy, rose 0.3% during the month, the Bureau of Labor Statistics reported. On a trailing 12-month basis, that amounted to 3.1%.
Economists surveyed by Dow Jones expected a monthly increase of 0.2% and an annual gain of 2.9%.
Excluding volatile food and energy prices, the so-called core CPI accelerated 0.4% in January and 3.9% higher than a year ago. The forecast was 0.3% and 3.7% respectively.
House prices, which account for about a third of the CPI's weight, accounted for much of the increase. The index for that category rose 0.6% for the month, contributing more than two-thirds of the overall increase, the BLS said. In 12 months, housing increased 6%.
Food prices also rose, 0.4% on the month. Energy helped offset some of the increase, with a 0.9% drop due largely to a 3.3% drop in gasoline prices.
Stock market futures fell sharply following the release. Futures tied to the Dow Jones Industrial Average fell more than 250 points and Treasury yields rose.
The release comes as Federal Reserve officials look to set the right balance for monetary policy in 2024. Although financial markets have been expecting aggressive interest rate cuts, policymakers have been more cautious in their statements publics, focusing on the need to let data be your guide rather than pre-set expectations.
Federal Reserve officials expect inflation to retreat to their 2% annual target largely because they believe housing prices will slow throughout the year. The January increase could be problematic for a central bank looking to take its foot off the brakes on monetary policy at its tightest level in more than two decades.
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