Housing prices skyrocketed, the US CPI in January 2023 "inched up" by 0.5%

Gregory Daco, chief economist at EY, said a CPI increase in January 2023 was not a "worrying thing" and predicted annual inflation would fall to 2.3% by the end of 2023.

On Tuesday (February 14, 2023), the U.S. Labor Department reported higher inflation in the first month of 2023, as soaring housing, gas and fuel prices took a toll on consumers.

CPI - Consumer Price Index, which measures a basket of common goods and services, rose 0.5% in January, corresponding to a year-on-year increase of 6.4%, slightly higher than expected. economists surveyed by Dow Jones (expected gains of 0.4% and 6.2%).

Core CPI excluding food and fuel prices, rose 0.4% monthly and 5.6% from a year ago, compared with estimates of 0.3% and 5.5%, respectively.

According to the US Bureau of Labor Statistics, rising accommodation costs account for about half of the monthly increase. This component makes up more than a third of the index and is up 0.7% on the month and up 7.9% from a year ago. CPI rose 0.1% in December.

Energy also contributed significantly, increasing 2% and 8.7% respectively, while food costs increased by 0.5% and 10.1% respectively.

Rising prices mean a loss of real wages for workers. Average hourly earnings were down 0.2% on the month and down 1.8% from a year ago, according to a separate BLS report that adjusts wages for inflation.

While price gains have eased in recent months, January's data showed inflation remains a factor that puts the US economy at risk of falling into recession this year.

That happened despite the Federal Reserve's efforts to quell the problem. The Fed has raised its benchmark interest rate eight times since March 2022 as inflation surged to a 41-year high last summer.

"Inflation is easing but the path to de-inflation is likely not going to be smooth," said Jeffrey Roach, chief economist at LPL Financial. "The Fed isn't going to make decisions based on just one report but clearly the risk is growing that inflation won't cool down fast enough for the Fed's liking."

Gregory Daco, chief economist at EY, said last month's rise in core CPI was not "a cause for concern" as soaring accommodation prices are likely to mean smaller increases in the coming months. next. Daco predicts annual inflation will fall to 2.3% by the end of the year. He predicts core inflation will drop to 2.8% by then.

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