MNI BRIEF: Fair Amount of Price Pressure in Pipeline -Fed Note

Disinflation continued in January but a growing share of price categories recorded above-5% inflation last month and alternate measures of underlying inflation pressures rose to their highest since September, evidence that "there’s still a fair amount of price pressure left in the pipeline," Federal Reserve Bank of Atlanta economist Brent Meyer said in a CPI note shared with reporters Tuesday.

Two-thirds of the CPI, by expenditure weight, rose at annualized rates greater than 5%, the highest share since August. Looking at unweighted prices, 60% rose at rates greater than 5%, compared to an average of 49% over the past three months. In a typical pre-pandemic month, just 20% of the unweighted market basket would post increases that high, Meyer said.

The median and 16% trimmed-mean CPI also jumped by annualized rates of 8.1% and 7.0%, respectively, in January, the strongest readings since September. And the BLS's revision of seasonal factors boosted the three-month annualized growth rate in the core CPI through December to 4.3% from 3.1% earlier, "less 'disinflationary' than what we’d previously thought," Meyer said. Former Fed policymakers and staffers told MNI last week the Fed could raise rates more than they forecast in December, pushing the peak toward 6% as disinflation proves bumpy and the labor market remains ultra tight. (See: MNI: Fed's Peak Rate Looking Perkier As Jobs Boom-Ex-Officials)