January Inflation Hits 3%, Higher than Expected

Inflation accelerated more than predicted in January, with consumer prices climbing 0.5% for the month and reaching 3% on an annual basis—the highest in over six months. Energy costs advanced more slowly than in December, but essentials like food and housing continued to push overall inflation upward. Analysts note that persistently elevated prices have strained American household budgets, particularly affecting lower-income families who spend a greater share of earnings on necessities.

Core inflation, which omits volatile food and energy components, came in at 0.4% for the month and 3.3% year over year, again exceeding forecasts. Food at home rose 0.5%, propelled by a 15.2% spike in egg prices, while housing accounted for nearly 30% of the month’s inflation. With energy prices still higher than pre-pandemic norms and transportation costs jumping 1.8%, many economists see little short-term relief.

Markets now look to the Federal Reserve for indications on whether further rate cuts remain on pause or if new data could alter policy course. Consumers, in the meantime, face pricier grocery, utility, and transportation bills heading into spring. Despite slight improvements in certain categories, Americans are navigating an environment where any small uptick can have an outsized effect on household finances.