Inflation rises 0.5% over last month in January, most since October

Inflation picked up in the first month of the year, defying optimism from investors and officials over a steady move lower seen in recent readings.

The Consumer Price Index (CPI) for January showed a 0.5% increase in prices over the past month, an acceleration from the prior reading, government data showed Tuesday. On an annual basis, CPI rose 6.4%, continuing a steady march down from a 9.1% peak last June.

Economists had expected prices to climb 6.2% over the year and jump 0.5% month-over-month, per consensus estimates from Bloomberg. New seasonal adjustments released by the BLS on Friday also switched December's initial reading of a 0.1% monthly drop in headline inflation to an increase of 0.1% in the year's final month.

Components of inflation include FOOD AT HOME (up 11.3% YoY), utility (piped) gas service (up 26.7% YoY) and shelter (up 7.9% YoY). So, the middle-class inflation tax (food, heating, housing) remains high.

https://confoundedinterest.net/2023/02/14/inflation-nation-us-real-average-hourly-earnings-negative-for-22-staight-months-in-january-as-inflation-heats-up-again-cpi-rises-0-5-mom-food-rises-11-3-yoy/

My grocery bill tells me those government numbers are a lie - and inflation is raging far past what they’re telling us.

My gas bill was $300 - low for this area, and only b/c I was gone for two weeks in December and January and the heat was entirely off. People in my neighborhood said their bills were in the $500-600, with the heat kept at 68 degrees.

I buy groceries for two people and my bill looks like I’m feeding my entire extended family for Thanksgiving. I just notice some sliced cooked beef we like on our salads has more than doubled in price - from ≈ $7.00 to $16.00.

Gas has just gone up .20/gallon over the past two days as well (So Cal).

These data indicate that inflation is not receding.

That might be because there is a lag both in the impact of fiscal spending which has yet to run through the system and because of the lag in the effect of increased interest rates imposed by the Fed.

The fact that inflation is not moderating fast enough raises at least problems both connected to expectations: first, the more durable the condition of inflation the more expectations for increased inflation are set, thus making inflation itself the cause of inflation; second, homeowners, stock market investors and lenders will all revise their opinion and conclude that the Fed is not near a pivot that rather it must continue tightening so they should reset the value of fixed assets causing a perceived loss due to the wealth effect.

Hence, we are in a foot race to see whether increased interest rates or the wages of fiscal profligacy will prevail concerning inflation and this race will be run while the issue of the budget comes to a head in Congress which, of course, sees the problem as a political problem rather than an economic problem.

It is a question for intense debate whether it is Congress or the Fed that is more irresponsible when it comes to fiscal and monetary policy. The Fed was created because it was considered that Congress, that is democracy itself, was the last place in which to vest control of our financial destiny. The Fed has proven equally irresponsible as it plays the agent of moral hazard and prints and prints.

Time is running out faster than this foot race. Any black swan, Ukraine or Taiwan or something that cannot be anticipated, and we could end in tears.

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