Inflation rose 0.2 percent in January, year-over-year numbers still above Fed’s target rate: CEI analysis

The Consumer Price Index report for January shows inflation rose 0.2 percent, lower than economists’ predictions. Inflation year-over-year remains above the Federal Reserve’s 2 percent target.

CEI Monetary Policy Analyst Steve Swedberg:

“The latest figures from the Consumer Price Index show that year-over-year inflation remains above the Federal Reserve’s 2 percent target, which acts as a reminder that inflation continues to weigh on American households. Inflation has proven more persistent than many policymakers predicted, suggesting that deeper structural forces remain at work in the economy. One of those structural forces is out-of-control government spending.

“This week, the Congressional Budget Office projected that between 2027 and 2036, the US government will be paying $16.2 trillion in net interest payments alone. That eyepopping amount represents past overspending and an ongoing lack of fiscal discipline. A spending trajectory sustained through borrowing and compounded by rising interest costs can contribute to persistent inflationary pressure by reinforcing expectations that debt will ultimately be accommodated through higher prices. This, in turn, affects pricing behavior across the economy. Until Congress can get its fiscal house in order, it will be everyday Americans who pay the price with higher costs of goods and services.”

CEI Senior Economist Ryan Young:

“Lower-than expected inflation completes a trifecta of good economic news. The other two parts are a 4.3 percent unemployment rate and fourth quarter growth of more than 4 percent. While there are caveats to all three items, they still show that there is no need for the Federal Reserve to further lower interest rates. It can concentrate on lowering inflation.

“Inflation has lingered above the Fed’s 2 percent target for five years. The economy is healthy enough for the Fed to fight inflation without worrying about sparking a recession. The administration can help through a combination of a more stable approach to policymaking and continued regulatory relief. Congress’ recent votes against tariffs are also a welcome sign that price relief may be on the way, though they must do more to overcome presidential vetoes.”