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Home CNN We all want to see lower prices, but here’s why that’s bad for the economy

We all want to see lower prices, but here’s why that’s bad for the economy

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As much as we’d all love to see prices go back to pre-pandemic levels, it’s not actually good for the economy. CNN’s Vanessa Yurkevich explains why it’s bad and what we want to see instead

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US consumer inflation cooled down in January, but less than expected

Originally Published: 13 FEB 24 08:34 ET

Updated: 13 FEB 24 09:56 ET

By Alicia Wallace, CNN

New York (CNN) — Price hikes eased off less than expected in January, but still offered a hint of relief for Americans who have suffered through some of the steepest price hikes in four decades.

The first measure of inflation for 2024, the Consumer Price Index, showed that prices rose by 3.1% for the 12 months ended in January, according to Bureau of Labor Statistics data released Tuesday. That marks a step back from December’s 3.4% rate and a dramatic cooling from the 6.4% increase seen in January 2023.

On a monthly basis, CPI rose by 0.3% in January, with stubbornly high shelter costs accounting for two-thirds of the gain, according to the BLS. Consumers got a bit of relief from falling gas prices; however, food prices (which thankfully are no longer outpacing overall inflation) rose at the highest monthly rate in a year.

While monthly food price changes are volatile and can be influenced by a variety of factors, including weather events and disease, they moved in the wrong direction for many Americans.

“Food prices kept going up, and that’s a real pain point,” Robert Frick, corporate economist with Navy Federal Credit Union, told CNN. “There’s the rate of inflation, which is coming down, then there’s the weight of inflation, which continues to mount. So even if you have 3%, that’s 3% on top of a mountain of inflation people are already carrying.”

Economists were expecting inflation to ease to 0.2% from December and slow to 2.9% annually, according to FactSet consensus estimates.

Overall inflation, as measured by the Consumer Price Index, has risen at 3% or above for 34 months in a row — the longest streak since the late 1980s and early 1990s.

“Of course [3%] is an arbitrary measure, but that’s the way that humans think about it” in hopes that it shows clear progress, Frick said.

Annual price increases surged post-pandemic, peaking at 9.1% in June 2022. In its battle to bring down that inflation, the Fed introduced 11 aggressive rate hikes, starting in March 2022, meant to crush demand and discourage spending.

Excluding the more volatile categories of food and energy, the core CPI index rose 0.4% from December, and the annual rate didn’t budge from the 3.9% increase reported a month before.

This is a developing story and will be updated.

The-CNN-Wire
™ & © 2024 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.

Electronics shopping

**This image is for use with this specific article only** Economists were expecting inflation to ease from December.

David Zalubowski/AP

13 Feb 24

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