The PCE report shows that the US inflation rate rose unexpectedly in January, which is a worrying sign for the Federal Reserve.

WASHINGTON — The Federal Reserve’s preferred inflation indicator rose in January, suggesting that price pressures remain entrenched in the US economy and could see the Federal Reserve continue to raise interest rates this year.

Friday’s Commerce Department report showed that consumer prices rose 0.6% from December to January, compared with a 0.2% rise from November to December. On an annualized basis, prices rose 5.4% compared to 5.3% year on year in December.

The report also showed that consumer spending rose 1.8% last month compared to December after falling the previous month.

In general, Friday’s data was the latest sign that the economy is still gripped by high inflation, despite the Fed’s strenuous efforts to contain it. Last week, the government released a separate measure of inflation, the Consumer Price Index, which showed prices rose 0.5% from December to January, much more than the 0.1% rise the previous month. On an annualized basis, consumer prices rose 6.4% in January. This was well below the recent peak of 9.1% in June, but still well above the Fed’s inflation target of 2%.

Since March last year, the Fed has attacked inflation by raising the key interest rate eight times. However, despite the higher cost of borrowing for individuals and businesses, the labor market remains remarkably resilient. This is actually a worrying sign for the Fed because high demand for workers tends to drive up wages and general inflation. In January, employers added a staggering 517,000 jobs and the unemployment rate fell to 3.4%, the lowest level since 1969.

The Fed is believed to be watching Friday’s inflation indicator, the Personal Consumption Expenditure Price Index, even more closely than the more well-known government consumer price index.

As a rule, the PCE index shows a lower inflation rate than the CPI. This is partly because rents, which have risen sharply, carry twice as much weight in the CPI as they do in the PCE.

The PCE price index also attempts to account for changes in how people shop when inflation spikes. As a result, it can pick up on new trends when, for example, consumers are moving away from expensive national brands in favor of less expensive brands.

The consumer price index showed an alarming increase from December to January: it jumped by 0.5% – five times more than from November to December.

Similarly, the government’s measure of wholesale inflation, which measures prices rising before they hit consumers, rose 0.7% from December to January after falling 0.2% from November to December.

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