According to a report by the Bureau of Labor Statistics, the Consumer Price Index surged by 6.4% from January 2022 to January 2023, owing to continued upward price pressure in fundamental household commodities such as food and shelter.
The monthly rise of 0.5% was higher than the predictions of analysts. Meanwhile, core inflation, which excludes the more fluctuating categories of food and energy, increased by 0.4%, exceeding projections as well. Food prices rose by 0.5%, and shelter prices increased by 0.7%, despite energy prices seeing a hike of 2.0%.
Bankrate’s Chief Financial Analyst, Greg McBride, provided a statement to The Daily Wire, remarking that “The pace of disinflation has slowed, and if a 0.5% monthly increase in headline and 0.4% in core prices are what passes for progress, we have low expectations.”
The latest price level report was released a week after President Joe Biden made a statement during his second State of the Union address, where he mentioned that “inflation is coming down.” He acknowledged that the pandemic disrupted supply chains and Putin’s war caused a disturbance in energy and food supplies, causing inflation to become a worldwide issue. However, he expressed confidence that the United States is better equipped than any other country to address the situation.
In January 2023, the year-over-year inflation rate was 6.4%, which indicated a slight decrease from December 2022, where it was at 6.5%. The drop was mostly due to energy prices, which had dropped 4.5% the previous month. However, this trend appears to be reversing, as gasoline and utility gas service prices rose by 2.4% and 6.7%, respectively, in January 2023. It is worth noting that fuel costs remained high, as gasoline prices reached their highest levels on record last year.
The increase in food prices has had a significant impact on households striving to make their ends meet. Food expenses at home have surged by 11.3% from January 2022 to January 2023, while food expenditures outside the home increased by 8.2% over the same period.
“The broad-based improvement needed to be seen in order to feel good about where inflation is headed is still lacking,” McBride continued. “The leading contributors continue to be categories that are staples of the household budget: food, shelter, electricity, natural gas, apparel, vehicle insurance, and household furnishing and operations.”
Inflation has resulted in the depletion of household purchasing power, which has forced certain consumers to finance their budgets using savings and debt. According to a Gallup survey, 50% of respondents felt that they were “financially worse off” than a year ago, while only 35% believed they were “financially better off,” making it the most discouraging outcomes for the poll since the economic recession of 2008 and 2009. Households with lower income levels were the most likely to report that they were financially worse off.
The Federal Reserve policymakers have been raising the target federal funds rates to counter the inflationary trends. Following four consecutive rate hikes of 0.75% and one rate hike of 0.5% in the latter half of 2022, officials hiked rates by 0.25% earlier this month. According to McBride, central bankers are still anticipated to raise interest rates by 0.25% in their meeting next month, but they will take into account additional data regarding inflation and unemployment before making their decision.
