Here is the distribution of inflation for January 2025 – in a chart

On February 13, 2025By Littum

A person trades at a Whole Foods Market grocer in New York City on December 17, 2024.

Spencer Platt | Getty Images

In January, inflation jumped on the back of higher prices for consumers’ staples such as groceries and energy. Economists worry that inflation has been rooted in the Federal Reserve’s goal, even when President Donald Trump’s policies around customs and immigration threaten to aggravate it.

The Consumer Price IndexAn inflation meter rose 3% in the 12 months ending in January, the US Bureau of Labor Statistics reported Wednesday.

The January reading is up From 2.9% in December. It marks the fourth consecutive month with increase in annual inflation when it was At 2.4% In September.

“It feels like everything that could go wrong in this report went wrong,” said Mark Zandi, chief economist at Moody’s.

That said, he warned that a month of data did not necessarily create a trend. It would be wise to see a few more inflation reports before ranging alarm bells, he explained.

“I wanted to send a yellow flare off,” Zandi said. “I would not send more than one, and would certainly not (yet) send a red flare.”

Wide Disinflation seems to be over

The consumer price index or CPI measures how fast prices rise or fall for a basket of goods and services, from haircuts to coffee, clothing and concert tickets.

CPI-inflation has dropped significantly from its high time of 9.1% in June 2022.

However, it remains over the Federal Reserve’s goal. The central bank aims at a 2% annual rate in the long term. To get there, economists say that inflation readings from month to month should be about 0.2%.

“Inflation has now been around these rates for some time and clearly no longer comes down,” Paul Ashworth, head of North America in Capital Economics, wrote in a note on Wednesday.

The apparent end of the broad period of disinflation in the United States is largely a function of the strength of the economy and the labor market, enabling businesses to raise prices more aggressively, Zandi said.

‘The egg is huge’

Price increases were “strong” almost everywhere in January, in categories such as groceries, gasoline, prescription medicine, vehicle insurance and repair, airline tickets and hotel room prices, Zandi said. The only big category with a fall was clothing, he said.

Prices for the grocer burst by 0.5% from December to January, from a monthly increase of 0.3% from November to December, according to BLS.

Egg prices rose by 15% from December to January according to CPI data. They have increased by 53% in the past year, largely due to a shortage of delivery created by a deadly bird flu outbreak, economists said.

“The egg shock is huge,” said Joe Seydl, senior Markets Economist in JP Morgan Private Bank.

These shocks filter to other grocery goods bound to eggs, such as baked goods, economists said.

Consumer prices rise 0.5% in January, higher than expected

There is also a substitution effect: Consumers can choose to switch to other proteins such as beef if bird flu increases the price of eggs and chicken, Seydl said.

Coffee prices are also strengthened in the middle of Climate -related problems In the world’s coffee -growing regions, Zandi said. For example, the price of instant coffee has increased by approx. 7% in the past year, according to CPI.

Petrol prices rose approx. 2% from December to January, a reflection of higher oil prices. Fuel oil increased approx. 6% during the month.

Increased prices for gasoline and diesel can filter through to other areas of the economy, such as food due to higher transport costs for distributors, economists said.

‘Through the worst’ of housing inflation

Inflation for both rent and “owner’s equivalent rent” (which measures the price where a homeowner could rent their stay) remained the level of the month, 0.3%.

Lyinflation was 4.4% in the past year, the smallest increase of 12 months since January 2022.

“We are increasingly sure that we are through the worst of the shelter inflation,” Seydl said.

Tariffs are likely to raise inflation

Meanwhile are Americans Stiffening for potentially higher inflation in the midst of expectations that Trump will impose on trading partners wide tariffs, which generally raises prices for consumers.

Economists expect Trump’s political priorities such as mass portions and tax cuts to also be inflationary.

Deportations can limit the work supply at a time of low US unemployment, putting upward pressure on wages, while tax cuts can burn expenses if consumers have more money, they said.

Tariffs will have an inflation effect that attenuates growth, says FMR. Dallas fed Fisher

“We still believe that Trump administration’s trade, fiscal and immigration policy agenda would be mildly inflationary,” Bank of America economists wrote in a note on Monday.

This inflation effect would probably play out in the second half of 2025, although this timeline could move forward if additional tariffs take effect in the next few weeks, the note says.

Tarifftrusel that already has an impact on car prices

Tariffs already appear to be bending prices for cars by increasing the demand in the short term, Seydl said.

The annual inflation rate for new vehicles has been driven upwards since October, however, low about 0%.

“The evidence becomes much wider over consumers trying to buy prior to customs,” Seydl said. “I think it’s probably the biggest driving force for automatic inflation.”

Trump threatened to impose, for example, 25% tariffs on Canada and Mexico As soon as next month. He also signed an order Monday that would impose 25% duty on steel and aluminum on March 4th.

Most major car manufacturers are very dependent on imports from other countries, including Mexico, to meet the demand of US consumers. Ford Motor CEO Jim Farley said Tuesday that Trump’s customs policy is causing “chaos” for the US automotive industry.

Currently, evidence suggests that consumers’ purchase of their purchase is “very concentrated” in the car market, Seydl said.

But it could expand to other categories such as consumer electronics and appliances, for example, he said.

An additional 10% additional duty on all imports from China came into force on February 4th. Most of what China exports to the United States is consumer goods such as clothing, toys and electronics.