The central bank is now holding rates at the highest level in more than two decades, to return inflation to two per cent over the longer haul.
CPI readings have fallen from a 9.1 per cent peak in June 2022, and progress towards two per cent is good news for policymakers – as is the economy’s apparent resilience as inflation cools.
But the Biden administration is struggling to convince voters that price pressures are easing, given that inflation is decelerating and this does not always translate to an outright drop in prices.
Biden recently criticised “shrinkflation”, where corporations shrink packaging rather than lowering prices as supply chains unsnarled.
“If you look at grocery margins, they’re exceptionally high,” Lael Brainard, who heads the National Economic Council, told CNBC.
“We’re going to keep highlighting junk fees, shrinkflation and asking corporations to pass those savings on so that consumers can see it in their grocery baskets,” she added.
In a speech in Pennsylvania, Treasury Secretary Janet Yellen acknowledged that the costs of some goods and services “are still too high.”
“Addressing this is one of our top priorities,” she said, highlighting efforts to reduce health care costs.
FOOD PRICES BITE
From December to January, overall inflation ticked up 0.3 per cent, an acceleration from the December figure, according to the Labor Department.
“The index for shelter continued to rise in January, increasing 0.6 per cent and contributing over two-thirds of the monthly all items increase,” the department said.
The food index also increased over the month, even as energy costs slumped, largely due to lower gas costs.
“The drop in core inflation virtually ground to a halt last month, mainly because of shelter prices,” said Navy Federal Credit Union corporate economist Robert Frick.
“Other service costs remain stubbornly strong, while the food price increases are particularly painful,” he added.
But Ian Shepherdson, chief economist at Pantheon Macroeconomics, expects core inflation to continue easing after what he called a “blip” this month. He added that “the numbers don’t change the big picture.”