WASHINGTON - Consumer prices rose by a bigger-than-expected amount in January, reflecting big increases in the cost of food and health care, the government reported Wednesday.
The Labor Department said that its closely watched Consumer Price Index posted a gain of 0.4 percent last month, matching the December increase and was higher than economists had expected.
Core inflation, which excludes food and energy, showed an increase of 0.3 percent, the biggest jump in this measure in seven months.
The higher inflation readings were certain to attract the attention of the Federal Reserve, which has been cutting interest rates aggressively to ward off a recession. The Fed has said that it believes the sharp economic slowdown would keep inflation pressures from rising.
The prolonged decline in housing, with falling sales and weak prices, has been a major drag on the overall economy. Growth skidded to a near standstill in the final three months of last year, rising at an annual rate of just 0.6 percent.
Some economists believe growth in this quarter and the next will turn negative, fulfilling the classic definition of a recession. To combat the economic weakness, Congress passed a $168 billion economic stimulus package to provide tax rebates to more than 130 million American families.
The Federal Reserve acted in January to aggressively cut interest rates with more rate cuts expected. However, the resurgent inflation pressures put Fed policymakers in the uncomfortable position of having to worry about both weaker growth and rising inflation.
Publication date: 2008-02-20
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