US consumer prices post biggest rise in nearly 4 years

WASHINGTON – U.S. consumer prices rose in January at the fastest pace in nearly four years, strengthening the case for the Federal Reserve to raise interest rates this year.

The Labor Department said Wednesday consumer prices rose 0.6 per cent last month, the most since February 2013, and twice what economists were expecting. A 7.8 per cent jump in gasoline prices accounted for nearly half the increase.

Stripping out food and energy prices, which tend to fluctuate sharply from month to month, so-called core consumer inflation rose 0.3 per cent in January. Fed policymakers monitor core measures of inflation especially closely.

Food prices rose in January for the first time in seven months. Grocery prices were unchanged, but the cost of eating out rose 0.4 per cent. The price of clothing, new cars, auto insurance and air fares all rose by 0.8 per cent or more in January.

Overall, consumer prices rose 2.5 per cent from a year earlier, most since March 2012. Core inflation rose 2.3 per cent over the last 12 months.

After remaining low in the aftermath of the 2007-2009 Great Recession, inflation is running above the Fed’s 2 per cent annual target.

The Fed left a key interest rate unchanged at its Jan. 31-Feb. 1 meeting. It raised rates in December for only the second time in a decade. Fed Chair Janet Yellen on Tuesday told a Senate committee that the central bank will likely resume raising rates in the next few months.

But with uncertainties surrounding President Donald Trump’s proposals on taxes, spending and trade, Yellen said the Fed still wants to keep assessing the economy.