The figure reported Friday by the Commerce Department was the largest year-over-year rise since 1982.
Excluding volatile food and energy prices, core inflation increased 5.2% in January from a year earlier.
Inflation, though, is expected to remain high and perhaps accelerate in the coming months, especially with Russia’s invasion likely disrupting oil and gas exports. The costs of other commodities that are produced in Ukraine, such as wheat and aluminum, have also increased. “Overall, the real economy appears to be in stronger health than we feared,” said Paul Ashworth, chief U.S. economist at Capital Economics, a forecasting firm.
Loretta Mester, president of the Federal Reserve Bank of Cleveland, said Thursday that she supported a series of rate hikes beginning in March. But she said the Fed should remain flexible: Faster rate hikes might be needed, she said, if inflation hasn’t begun to fade by mid-year, or more gradual increases if inflation is slowing.
Fed officials want inflation to fall back to its 2% target, as measured by the Commerce Department’s gauge, released Friday. A separate measure, the consumer price index, released two weeks ago, showed that inflation reached 7.5% in January from a year earlier, also a four-decade high. There are early indications that consumer spending has stayed healthy, boosted by the rapid fading of the omicron wave of the coronavirus. JPMorgan Chase said that spending on its credit cards for airline tickets, hotel rooms, and restaurant meals rose in the first half of this month.
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