Inflation rose in January as prices for groceries, housing picked up

Inflation heated up more than expected in January, as prices for groceries, housing and energy all picked up for Americans in early 2025, potentially complicating President Donald Trump’s agenda.

A key gauge of inflation—the consumer price index—showed Wednesday morning that prices rose by 3.0 percent in January from a year earlier, according to the Labor Department. That’s hotter than the 2.9 percent annual gain reported in December, underscoring economic concerns of Americans who voted out incumbents in federal elections last fall.

Stripping out volatile food and energy categories, so-called core inflation was also higher, growing by 3.3 percent for the year ending in January.

Wednesday’s data could strengthen the case for the Federal Reserve to remain in an extended pause mode while the economy is strong and inflation remains elevated.

This surge in prices comes at a time of heightened uncertainty about the economic outlook, with Trump promising a series of trade, immigration and spending policies that could rekindle inflation or stifle growth.

“This is an unambiguously bad piece of news for everyone involved—the administration, Trump and the Fed,” said Douglas Holtz-Eakin, president of the American Action Forum, a conservative think tank.

Trump has already repeatedly criticized the Fed, and on Wednesday he called for lower interest rates, saying they would “go hand in hand with upcoming Tariffs!!!”

Wednesday’s data showed that consumer prices rose 0.5 percent on a monthly basis from December, the biggest increase since August 2023. Shelter costs, which grew 0.4 percent, accounted for nearly 30 percent of the monthly gain.

Grocery prices climbed 0.5 percent last month—the largest gain since October 2022—or 1.9 percent on an annual basis. That appeared to be driven by a 15.2 percent jump in egg prices, due to an outbreak of the bird flu that has create a nationwide egg shortage.

After the Fed trimmed borrowing costs by a full percentage point between September and December of last year, it hit the pause button last month at its first meeting of 2025. Officials have given no indication of when they would cut again but have signaled that they anticipate the pace of cuts slowing to just two this year, down from the four cuts projected before the election.

Fed officials this week said they are in no rush to lower rates.

“With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance,” Fed Chair Jerome H. Powell told Senate lawmakers Tuesday.

To be sure, lower interest rates have yet to trickle down into the rates consumers see on many types of loans. For example, mortgage rates have increased in recent months, with the average rate on the popular 30-year mortgage rising above 7 percent last month before receding somewhat, according to mortgage giant Freddie Mac.

Mortgage rates typically are correlated with long-term borrowing costs for the U.S. government, which have generally ticked up amid concerns about persistently elevated inflation.

Last month, Trump criticized Powell and the Fed, saying on the platform Truth Social that they failed to “stop the problem they created with Inflation,” but he stopped short of calling for lower interest rates.

He separately said he expects that steps by his administration to reduce energy prices would make it possible to keep inflation in check and lower interest rates.