United States: Headline and core inflation rise in January
February 17, 2011
Consumer prices rose for a seventh consecutive month in January, increasing a seasonally adjusted 0.4% over the previous month. The reading came in a notch above the 0.3% rate expected by market analysts but was well ahead of the 0.1% increase tallied in January 2010. As a result of the pronounced monthly price rise, annual headline inflation inched up to 1.6% in January (December: 1.5%). The increase reflected soaring energy costs and higher prices for food, as rising commodity prices are passed through to consumers. Moreover, the closely watched core inflation index, which does not include food and energy, rose a less pronounced 0.2% over the previous month, driving annual core inflation to 1.0% (December: 0.8% year-on-year) and thus leaving October's record low of 0.6% far behind. The recent acceleration in core inflation suggests firming inflationary pressures, which can translate into higher interest rate going forward. The Fed anticipates PCE inflation (based on the price index for personal consumption expenditures) to average between 1.1% and 1.7% in 2011 and between 1.1% and 1.8% in 2012.