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  The Consumer Price Index (CPI) Rose 0.1% in January
Posted Under: CPI • Data Watch • Government • Inflation • Fed Reserve

 
Implications:  Consumer prices increased 0.1% in January, with prices rising in nearly every major category.  Prices for housing, medical care, and food led the index higher in January, partially offset by a decline in the cost of gasoline.  Consumer prices are up 2.5% in the past year, tied for the largest twelve-month increase going back to August of 2018.  Strip out the typically volatile food and energy sectors, and "core" prices rose 0.2% in January.  In addition to housing and medical care, prices for apparel, recreation, education, and airline fares pushed the core reading higher.  Core prices are up 2.3% in the past year, just a tick off the highest annual increase we have seen since the recovery started.  And "core" prices have hovered at or above the Fed's 2% inflation target for twenty-three consecutive months.  Add in employment data continuing to show strength and it makes sense the Fed doesn't expect further rate cuts unless we see a material change in the economic outlook.  On the wage front, average hourly earnings rose 0.2% in January and have increased 3.1% in the past year.  Take out inflation, and "real" earnings rose 0.1% in January and are up a modest 0.6% in the past year.  With the strength of the labor market, we believe earnings will trend higher in 2020.  Healthy consumer balance sheets, a strong job market, inflation in-line with Fed targets, and the continued tail winds from improved tax and regulatory policy, all reinforce our belief that the economy will continue to grow at a healthy pace in the year ahead.  In other news this morning, new claims for unemployment benefits rose 2,000 last week to a very low 205,000.  Continuing claims fell 61,000 to 1.698 million.  These figures are consistent with continued solid payroll growth in February.

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