WASHINGTON (AP) — The Federal Reserve’s preferred inflation gauge ticked higher in January, a sign that price pressures remain entrenched in the U.S. economy and could lead the Fed to keep raising interest rates well into this year.
Friday’s report from the Commerce Department showed that consumer prices rose 0.6% from December to January, up sharply from a 0.2% increase from November to December. On a year-over-year basis, prices rose 5.4%, up from a 5.3% annual increase in December.
The report also showed that consumer spending rose 1.8% last month from December after falling the previous month.
The Fed is thought to monitor the inflation gauge that was issued Friday — the personal consumption expenditures price index — even more closely than it does the government’s better-known CPI.
Typically, the PCE index shows a lower inflation level than CPI. In part, that’s because rents, which have soared, carry twice the weight in the CPI that they do in the PCE.
The PCE price index also seeks to account for changes in how people shop when inflation jumps. As a result, it can capture emerging trends — when, for example, consumers shift away from pricey national brands in favor of less expensive store brands.
The consumer price index showed a worrisome rise from December to January: It jumped 0.5% — five times the November-to-December increase.