CUNA Senior Economist Dawit Kebede, PhD, issued the following statement in response to the Labor Department’s January Consumer Price Index Report:
“Consumer prices increased 6.4% year-over-year slightly cooling down from 6.5% last month. Monthly prices in January increased 0.5%, a faster rate compared to the previous two months. Both numbers came in higher than expected.
“Increase in housing prices contributed for half of the monthly rise. Its contribution to core consumer price index (CPI), excluding food and energy items, is even higher at 60%. The index for housing is a lagged indicator in measuring the CPI relative to current market trends. If this index stayed sideways in January, inflation would have slowed in line with expectation. The CPI is expected to reflect current market declines in housing prices in the second half of the year.
“Prices for medical care, air travel, and used cars went down in January. The price for used cars declined by 1.9% continuing a downward trend. The increase in new car prices is also the slowest in the last six months. This shows that auto prices are not only stabilizing but also partly giving back the price gains in the last two years. Used car prices are now down 11.6% relative to a year ago.
“Prices are still higher than the Federal Reserve's target of 2% despite some progress. This is true even after excluding lagged and volatile indicators in the CPI.”