US inflation increased by more than expected in January 2025,as higher egg and energy prices helped to push up the cost of living for Americans.
Inflation rose to 3%, its highest rate for six months, and above the 2.9% expected by economists.
The rise comes weeks after the Federal Reserve decided to hold interest rates, saying there was significant uncertainty about where the economy might be headed.
It poses a challenge to President Donald Trump, who made tackling inflation a centerpiece of his election campaign last year, but has put forward policies, such as higher tariffs on imports, that economists say risk pushing up prices.
The uptick in prices last month was wide-ranging, affecting car insurance, airfare, medicine and other basics.
Grocery prices climbed 0.5% over the month, compared with 0.3% in December, as egg prices surged more than 15% amid shortages caused by outbreak of avian flu.
That marked the biggest monthly increase in nearly a decade, the Labor Department said.
Prices for clothing, by contrast, declined, while rents and other housing related costs increased 4.4% over the last year, marking the smallest 12-month increase since January 2022.
Core inflation, which strips out food and energy and is seen by analysts as a better measure of underlying trends, was 0.4% over the month, the fastest pace since March.
The Federal Reserve raised interest rates sharply starting in 2022, hoping higher borrowing costs would cool the economy and ease pressures that were pushing up prices.
It had started cutting rates in September, saying it wanted to avoid any further cooling.
But signs of persistent inflation above the bank’s 2% target in recent months prompted it to keep interest rates unchanged in January.
Federal Reserve chairman Jerome Powell told Congress on February 11 that the bank was in little hurry to cut rates further.
He noted that it remained unclear how Trump’s tariff plans would shape the Fed’s policies, since the measures could prompt a slowdown in the economy, alongside a rise in prices.
On February 12, President Trump called on the Fed to lower interest rates to go “hand-in-hand” with tariffs.
However, some analysts said after the report that they were no longer expecting any rate cuts this year.
In morning trade, the major stock indexes in the US opened lower, while interest rates charged on US government debt climbed as investors bet that borrowing costs would remain higher for longer.
