Inflation in the United States rose unexpectedly in January, reaching 3%, its highest level in six months, and surpassing economists’ expectations of 2.9%.
The increase was driven by rising egg and energy prices, adding to the financial strain on American households.
The inflation surge comes weeks after the US Federal Reserve decided to hold interest rates steady, citing uncertainty about the economy’s direction.
According to BBC, the rise presents a challenge for US President Donald Trump, who made curbing inflation a key part of his election campaign. However, some economists warn that his proposed policies, including higher tariffs on imports, could further drive up prices.
Ryan Sweet, chief US economist at Oxford Economics, suggested that Trump might need to reconsider his tariff plans.
“Tariffs can still be used as a bargaining tool to get some concessions from other countries, but the political optics of putting even a little upward pressure on consumer prices via tariffs wouldn’t be great for the Trump administration,” he wrote.
Price increases were widespread last month, affecting essentials such as car insurance, airfare, and medicine. Grocery costs rose by 0.5%, compared to 0.3% in December, with egg prices soaring over 15% due to shortages caused by an avian flu outbreak.
The Labor Department noted that this was the sharpest monthly increase in nearly a decade. While clothing prices fell, housing-related costs rose by 4.4% over the past year, marking the smallest annual increase since January 2022.
Core inflation, which excludes food and energy prices and is considered a better indicator of long-term trends, climbed by 0.4% over the month, the fastest pace since March.
Brian Coulton, chief economist at Fitch Ratings, described the data as concerning. “This is not a good number. It illustrates how the [Federal Reserve] has not completed the job of getting inflation back down just as new inflation risks – from tariff hikes and a squeeze on labor supply growth – start to emerge,” he said.
The Federal Reserve aggressively raised interest rates starting in 2022 to slow inflation but began cutting rates last September to prevent excessive economic cooling.
However, persistent inflation above the Fed’s 2% target led policymakers to hold rates steady in January. Fed Chairman, Jerome Powell told Congress on Tuesday that the central bank was in no rush to lower rates, adding that the impact of Trump’s tariff proposals on monetary policy remained uncertain.
On Wednesday, Trump urged the Fed to cut rates to align with his tariff strategy, but some analysts now believe rate cuts are unlikely this year.
In response to the inflation report, US stock markets opened lower, while interest rates on government debt rose as investors anticipated prolonged higher borrowing costs.
