A new report on inflation is due this morning. Economists surveyed by Bloomberg forecast that the annual rate of price increases will slow to 6.2% in January following a decline to 6.5% in December. More broadly, inflation has cooled recently from a 40-year high of 9.1% in June.
Last month’s consumer price index report paved the way for the Federal Reserve to hike rates by a traditional 0.25 percentage point, a significant shift from its more aggressive stance at prior meetings when it raised rates by 0.75 and 0.50 percentage points.
Stocks rallied in response to the Fed’s latest decision, anticipating that the central bank was closer to pausing rate hikes. But January’s surprising blowout jobs report, which showed U.S. employers added 517,000 new positions, will prompt the Fed to continue raising rates to lower inflation given the low unemployment rate, Fed Chairman Powell said last week.
CPI expectations: Inflation could ease faster than Fed believes, reducing need for rate hikes, easing recession risk
Today’s data will likely provide more clarity on the Fed’s game plan for the rest of the year. Follow along for live updates:
When does the CPI report come out?
The Bureau of Labor Statistics will release the CPI report at 8:30 a.m. ET.
Futures trading for the Dow Jones Industrial Average are moving slightly higher leading up to the report’s release. The index is up over 1% for the past week.
The initial CPI report for December found that consumer prices declined by 0.1% from November. However, revised data released last week found that prices actually rose by 0.1% in December. It also found that prices rose by 0.2% in November versus the previously reported 0.1% increase.
These revisions resulted from annual adjustments the BLS makes to account for seasonal variation in CPI data. These adjustments correct for price changes that correspond to seasonal demand. For instance, bathing suit prices tend to increase as the summer approaches but are discounted leading up to August.
Causes of inflation
A variety of factors are contributing to the high level of inflation Americans have been experiencing for over a year. The factors include increased demand resulting from stimulus checks, labor shortages, supply chain bottlenecks and the war in Ukraine which caused energy prices and other commodities to become more expensive.
Another cause of inflation is wage gains. That’s because when workers earn more money it gives producers the ability to pass on more price increases.
Wage growth in 2022: It showed signs of slowing. Is it enough to avert a recession?
2023 recession odds: Putting the brakes on runaway wage growth could help avoid a recession in 2023, but it won’t be easy
Average hourly earnings currently hover around $33, a 4.4% rise from last year, according to data from January’s jobs report.
When is the next inflation report?
The Fed’s preferred measure of inflation, the Personal Consumption Expenditures price index, or PCE, comes out on Feb. 24. The next CPI report is due on March 14.
What is the current inflation rate?
The current rate of inflation is 6.5% on annual basis.
CPI data expectations
Economists surveyed by Bloomberg predict prices rose by 0.5% on a monthly basis from December’s 0.1% monthly increase. On an annual basis, they estimate a 6.2% rise in prices.
CPI stands for consumer price index. It measures changes in how much the average urban American consumer pays across the board for goods and services over a given period of time.
Core CPI is a measure of the change in consumer prices excluding energy and food which are generally the most volatile components of CPI. Economists expect core CPI for January to drop to 5.5% on an annual basis from 5.7% in December.
Elisabeth Buchwald is a personal finance and markets correspondent for USA TODAY. You can follow her on Twitter @BuchElisabeth and sign up for our Daily Money newsletter here
This article originally appeared on USA TODAY: CPI numbers release on inflation due today: Follow for live updates