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E-mail Xinhua, February 13, 2025
by Matthew Rusling
WASHINGTON, Feb. 12 (Xinhua) -- U.S. inflation jumped more than expected in January, dashing hopes for an end to high prices and creating potential problems for the new administration under President Donald Trump.
The consumer price index (CPI), which measures prices of a broad spectrum of U.S. goods and services, increased 3.0 percent in January from a year ago, after climbing 2.7 percent in November and 2.9 percent in December, according to data released Wednesday from the Bureau of Labor Statistics.
Stripping out food and energy prices, core CPI increased 0.4 percent month on month, pushing the year-on-year inflation rate to 3.3 percent, up from 3.2 percent in December.
Shelter costs comprised 30 percent of the overall rise, jumping 0.4 percent month on month.
Food and shelter prices hit low-income individuals and families particularly hard. Those living on fixed incomes, such as retirees, are also more sensitive than the general population to inflation.
Markets took a nosedive on the news, as ongoing inflation means no end in sight for high interest rates.
"With Trump adding tariffs to the mix, there is very little chance that the rate will drop to the 2 percent target," Gary Clyde Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics, told Xinhua.
The U.S. Federal Reserve's target rate of inflation is 2 percent.
"My guess is that inflation will persist in the range of 3.0 percent to 3.8 percent for the next six months," said Hufbauer, adding that one silver lining is that food inflation might not go up.
Dean Baker, a senior economist at the Center for Economic and Policy Research, believes otherwise. He told Xinhua that it "seems likely" that food inflation will continue to rise.
Speaking of the high egg prices due to the current U.S. bird flu epidemic, Baker said "the Trump administration does not seem to take seriously its responsibility to contain diseases in animals, which means the bird flu will continue to spread."
"Also, if Trump deports a large number of undocumented workers, as he has promised, that will raise prices of agricultural products and processed food, since immigrant workers are a large share of the workforce in both sectors," the expert said.
When asked when inflation might stop rising or even begin to come down, Baker replied, "Probably not soon."
Hufbauer suggested that it might take a recession to bring U.S. prices back down.
"Unless the Fed raises the policy rate to 4.50 percent to 4.75 percent or higher, we will have to wait for a recession before prices come down. Consumers have maxed out their credit cards, so I expect the economy to soften in the third or fourth quarter this year," he said.
"Inflation is a real challenge for Trump as the recent numbers show rising costs on food and energy as well as other critical areas," Brookings Institution Senior Fellow Darrell West told Xinhua.
"Since Trump promised to bring costs down and that was so important for him in the election, the persistence of inflation will hurt him and make it difficult to deliver on some of his key objectives," West said.
Barry Bosworth, economist and senior fellow at the Brookings Institution, suggests that the inflation might cause political pain for the newly inaugurated president, and the administration's threats of tariffs seem "reckless at a time of great uncertainty."
Christopher Galdieri, a political science professor at Saint Anselm College in New Hampshire, told Xinhua: "I think the real question is whether this is a seasonal blip or something that continues."
"We saw under Biden that inflation is political and electoral kryptonite. If it continues, expect a lot of marginal Trump voters to reconsider their support for him," Galdieri said.
Clay Ramsay, a researcher at the Center for International and Security Studies at the University of Maryland, said that for the time being, Trump supporters will attribute inflated prices to the Biden administration.
"By summer it will be hard to keep up that attitude," Ramsay said. Enditem
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