Category: Economy

There may be plenty of reasons to confirm President Joe Biden’s nominees to the Federal Reserve, but economists say concern that the central bank won’t act to rein in inflation shouldn’t be among them.

It is virtually guaranteed that the Fed will hike interest rates next month to combat rising prices even if Sarah Bloom Raskin, Lisa Cook and Philip Jefferson are yet to be confirmed by the Senate, according to three economists who spoke with CNBC.

The Fed is “going to raise rates in March,” said Jason Furman, who served as chair of the Council of Economic Advisers in the Obama administration. “The only question is, do they raise by 25 basis points or 50 basis points?”

The White House and top Democrats have in recent days raised concerns that without a fully staffed Fed board of governors, the central bank will lose its edge on rising prices. But economists suggested the urgency behind that messaging is politically motivated and that the Fed’s chances to quell inflation aren’t tied to this confirmation process.

Democrats on the Senate Banking Committee are frustrated with an ongoing Republican boycott that is preventing them from advancing all five of the president’s Fed nominees, including current board members Chair Jerome Powell and Lael Brainard.

The GOP says the main reason behind their blockade is concern over Raskin, her views on climate policy and her prior work for fintech company Reserve Trust.

But economists who are tracking the inflation outlook say the Fed is equipped to curb inflation even if the politics stays messy.

Furman said lawmakers should take comfort in the fact that the Fed has already telegraphed several rates hikes ahead.

“I don’t think [the nominees] dramatically change the course of monetary policy one way or the other in the near future,” Furman, now a professor of economics at Harvard University, said of Raskin, Cook and Jefferson.

Asked for comment, the White House referred CNBC to a statement made by Treasury Secretary Janet Yellen in January about the president’s candidates.

“I am confident these nominees will build on that progress. I also know that these individuals will respect the tradition of an independent Fed, as they work to fight inflation, support a strong labor market and ensure our economic growth benefits all workers,” Yellen said on Jan. 14.

“I strongly believe that a fully staffed Federal Reserve is critical to our economic success, and I urge the Senate to act swiftly to confirm these nominees,” she added at the time.

The Fed, the globe’s most powerful central bank, is tasked by Congress to maximize employment and keep inflation in check through adjustments to interest rates. It tends to raise borrowing costs when it feels the economy may be overheating, and it cuts rates in times of economic duress.

It slashed rates to near zero in the spring of 2020 as the Covid-19 pandemic swept across the world and forced thousands of businesses nationwide to close. But now, with vaccines widely available and annualized inflation running north of 7%, the Fed is widely expected to make it more expensive to borrow throughout 2022.

Investors say there’s a 71% chance the Fed raises the overnight lending by 25 basis points at its March meeting, while 29% are betting they go big with a 50-basis-point jump, according to the CME Group’s FedWatch tool.

But with Republicans holding up the confirmation of the president’s nominees, some Democrats have suggested in recent days that the Fed could be left without sufficient firepower to curb the steep inflation.

“Everyone understands we need a full Federal Reserve Board — the first one in nearly a decade — to tackle inflation and bring prices down for American families,” Jen Psaki, the White House press secretary, said on Wednesday.

That sentiment was echoed a day later by Sen. Sherrod Brown, the chairman of the Senate Banking Committee that is attempting to recommend the president’s nominees to the broader Senate.

Brown, D-Ohio, also alluded to the ongoing GOP boycott and Republican Sen. Pat Toomey’s demand to hold Raskin back for further questioning.

“Ranking Member Toomey is holding up our fight against inflation because Ms. Bloom Raskin doesn’t remember a phone call from five years ago,” Brown said in a press release on Thursday.

Moody’s Analytics economist Mark Zandi said Thursday that he likes all of Biden’s nominees, but added that he’s certain the Fed will hike next month.

“Oh yeah. That’s a slam dunk. It’s just a question of how many rate hikes this year, and for the March meeting, whether they should go for a 50-basis-point hike as opposed to a quarter-point hike,” Zandi, chief economist at Moody’s Analytics, said Thursday.

“I think there are a lot of reasons why these nominees should be approved,” Zandi said. “But I wouldn’t put fighting inflation at the top of the list.”

Michael Feroli, chief economist at JPMorgan, went even further.

He suggested Thursday evening that the additions of Raskin, Cook and Jefferson to the Fed’s governing body would make the central bank more “dovish,” or more apt in general to favor easier monetary policy and lower rates.

“The Board and Committee can operate fine without the confirmations,” he wrote in an email. “It’s not like adding three doves will speed up the hiking cycle.”

Sales of previously owned homes in January rose 6.7% from December to a seasonally adjusted annualized rate of 6.5 million units, according to the National Association of Realtors. That exceeded Wall Street expectations significantly. Sales were 2.3% lower compared with January 2021.

The supply of homes for sale fell to a record low, down 16.5% from a year ago. There were just 860,000 homes for sale at the end of January. At the current sales pace it would take just 1.6 months to exhaust that inventory. A 4 to 6-month supply is considered a balanced market. That is also a record low.

“Seller traffic is very very low, implying that inventory is struggling to make the turn. Realtors are indicating multiple bidding wars are still happening,” said Lawrence Yun, chief economist for the Realtors.

Tight supply and strong demand pushed the median price of a home sold in January to $350,300, an increase of 15.4% from January 2021.

That price is being somewhat skewed by the fact that the bulk of sales activity is on the higher end of the market. Supply is leanest on the low end. Homes priced between $100,000 and $250,000 were down 23% from a year ago, while sales of homes priced between $750,000 and $1 million rose 33%. Sales of homes priced above $1 million were up 39%.

Homes are also selling fast, with an average 19 days to go under contract. One year ago, when the market was also strong, days-on-market was 21.

These sales are based on contracts signed in November and December, before mortgage rates began to rise sharply. The average rate on the 30-year fixed loan was around 3.2% during that time. Now it is just over 4%, according to Mortgage News Daily.

The share of sales made all in cash rose to 27% from 19% a year ago. Part of that may be due to a rise in the investor share to 22% from 15% a year ago.

“Investors are really popping out, and this may be why we’re seeing a pop in home sales,” said Yun.

“The major question is whether rising rates will quench housing demand that stems, in large part, from a demographic tidal wave of young households at key homebuying ages,” said Danielle Hale, chief economist for Realtor.com. “Our expectation is that we’ll continue to see home sales at a relatively high level throughout 2022, as post-pandemic shifts like rising workplace flexibility enable would-be buyers to expand their geographic search horizons and find an affordable place to call home.”

Sales of newly-built homes, which are counted by contracts signed during the month not closings, jumped nearly 12% in December from November. Buyers are turning more to new construction because of the very low supply of existing homes for sale. Unfortunately builders are not keeping up with demand, as supply chain and labor issues slow production.

NEW YORK — St. Louis Federal Reserve President James Bullard cautioned Thursday that without central bank action on interest rates, inflation could become an even more serious problem.

“We’re at more risk now than we’ve been in a generation that this could get out of control,” he said during a panel talk at Columbia University. “One scenario would be … a new surprise that hits us that we can’t anticipate right now, but we would have even more inflation. That’s the kind of situation that we want to … make sure it doesn’t occur.”

Bullard has made news lately with his calls for aggressive Fed action. He has advocated for a full percentage point in rate increases by July in an effort to stem price surges that are running at the fastest pace in 40 years.

In his remarks Thursday, Bullard repeated his assertion that the Fed should “front-load” rate hikes as way to get ahead of inflation running at a 7.5% clip over the past year.

Fed officials had been resisting tightening policy, insisting for much of last year that the current run-up in prices was tied to pandemic-specific factors, such as clogged supply chains and outsized demand for goods over services, and would fade over time.

“Overall, I’d say there’s been too much emphasis and too much mindshare devoted to the idea that inflation will dissipate at some point in the future,” Bullard said. “We’re at risk that inflation won’t dissipate, and 2022 will be the second year in a row of quite high inflation. So that’s why given this situation, the Fed should move faster and more aggressively than we would have in other circumstances.”

The Fed has indicated it likely will start raising interest rates in March, which would be the first increase in more than three years. After that, markets are looking for an additional five or six increases in 25 basis-point increments. A basis point is equal to 0.01%.

Bullard said the upcoming change in policy shouldn’t be viewed as an attempt to restrict the markets and the economy.

“It’s not tight policy. Don’t let anybody tell you it’s tight policy,” he said. “It’s removal of accommodation that will signal that we take our responsibility seriously.”

Market pricing for rate hikes has tempered over the past day or two, particularly after a release Wednesday of the January meeting minutes of the Federal Open Market Committee showed officials are looking to take a measured approach toward the removal of policy help.

Traders are now pointing to a 25 basis-point hike in March after previously looking to a 50 basis-point move, according to CME data. The probability for seven hikes dropped Thursday to 43% after approaching 70% earlier in the week.

Supply chain issues for homebuilders appear to be getting worse, and that is weighing on confidence in the industry.

Builder confidence in the single-family, newly built housing market fell 1 point in February to 82 on the National Association of Home Builders/Wells Fargo Housing Market Index. That is the second straight month of declines. Anything above 50 is considered positive. The index stood at 84 in February 2021.

“Production disruptions are so severe that many builders are waiting months to receive cabinets, garage doors, countertops and appliances,” said NAHB Chairman Jerry Konter, a builder from Savannah, Georgia. “These delivery delays are raising construction costs and pricing prospective buyers out of the market.”

Surging lumber prices are also adding thousands of dollars to the cost of new homes.

Homebuyers are already contending with rising interest rates. The average rate on the popular 30-year fixed mortgage just crossed over 4%, well over a full percentage point higher than it was a year ago. Add higher rates to higher home prices, and some buyers are simply unable to afford it. This is why rental demand is currently so high.

“Residential construction costs are up 21% on a year over year basis, and these higher development costs have hit first-time buyers particularly hard,” said Robert Dietz, NAHB’s chief economist. “Higher interest rates in 2022 will further reduce housing affordability even as demand remains solid due to a lack of resale inventory.”

Of the index’s three components, current sales conditions increased 1 point to 90, and sales expectations in the next six months fell 2 points to 80. Buyer traffic fell 4 points to 65.

Regionally, on a three-month moving average, sentiment in the Northeast increased 3 points to 76. In the West it rose 1 point to 89, and in the Midwest it fell 1 point to 73. Sentiment in the South dropped 1 point to 86.

U.S. consumers are spending more money while also growing savings in a positive sign for the economy, according to Bank of America CEO Brian Moynihan.

Moynihan told CNBC’s Jim Cramer on Wednesday that spending on Bank of America cards has jumped by as much as 20% from last year.

“When you look at the core spending levels of consumers, they continue to be very strong,” Moynihan said. “January’s up nearly 15 to 20% [from a year earlier]; we’re seeing that continue into February.”

Bank of America is the second-biggest U.S. bank by assets, after only JPMorgan Chase. Its relationships with U.S. households, small businesses and corporations give Moynihan a unique view into the health of the economy.

While there was concern that consumer bank account balances would plunge after government stimulus programs ended, that hasn’t been the case yet, Moynihan said. Instead, balances have risen for the “last six or seven months,” according to the CEO.

“The second thing is that consumers have more money in their account,” Moynihan said. “So in the month of January their accounts grew again, especially for consumers that carry lower balances.”

Moynihan said that his bank was poised to generate more earnings in a rising rate environment. The Federal Reserve is expected to start hiking its benchmark rate next month.

The wide-ranging interview covered the bank’s technology investments. As of last month, Bank of America had 16 million active Zelle users, and last year Zelle transactions exceeded paper checks for the first time.

This story is developing. Please check back for updates.

A Republican boycott Tuesday held up a Senate committee vote on the appointment of a top banking regulator and Federal Reserve Chairman Jerome Powell.

Sen. Sherrod Brown, head of the Senate Banking Committee, said the panel could not hold a formal vote because the GOP absence meant a lack of a necessary quorum. The vote was to send to the floor the names of Powell, Sarah Bloom Raskin, whom President Joe Biden nominated to be the Fed’s vice chair for supervision, and three other nominees.  

“I will delay votes on these nominees. We will update you when we’ve rescheduled,” Brown said Tuesday afternoon. “Republicans have walked out on the American people.”

After making the announcement, Brown held an unofficial vote to drive home the point that Democrats support the president’s nominees. Sen. Elizabeth Warren, D-Mass., clarified that she backs all nominees except for incumbent Fed Chair Powell.

The delay throws the confirmation of five Fed nominees, including Powell and would-be Vice Chair Lael Brainard, into question. Democrats had hoped to vote for all five of them as a package, with Republican Powell balancing out original Democratic picks like Raskin. Biden chose the other two nominees, Lisa Cook and Philip Jefferson, for seats on the Fed’s board of governors.

The postponement also comes at a tense time for the nation’s central bank, which is widely expected to start raising interest rates in March to quell inflation levels not seen since the 1980s.

Committee ranking member Sen. Pat Toomey, R-Pa., announced earlier in the day that the GOP would boycott the nomination vote due to concerns about Raskin’s prior work for Reserve Trust, a fintech firm she worked for shortly after leaving the Obama administration.

The threat of a high-profile and protracted dispute over Fed nominees, who are supposed to be insulated from partisan politics, could theoretically push the White House to ditch Raskin. To date, the administration has supported its nominee and said there have been few choices better equipped to oversee the nation’s financial companies than Raskin.

“Sarah Bloom Raskin is one of the most qualified people to ever be nominated to serve on the Board of Governors of the Federal Reserve,” the White House said in an emailed memo Tuesday morning. “Despite her qualifications, Senators Pat Toomey and Cynthia Lummis over the last several weeks have lobbed unfounded and unfair attacks at Raskin related to her time on the Board of Directors of Reserve Trust.”

“If our Republican colleagues were as concerned about inflation as they claim to be, and as certainly we are, then they would come to the markup and make sure that the Fed has the personnel to ultimately have the monetary policy that can rein in inflation,” said Sen. Robert Menendez, a Democrat from New Jersey.

Darin Miller, a spokesman for Lummis, said he found that criticism lacking. The Wyoming senator was first to question Raskin over her work for Reserve Trust during her nomination hearing earlier in February.

“Dems attacking Banking Rs over inflation while trying to force a vote on hyper-political Raskin is laughable,” Miller wrote on Twitter as Democrats announced the delayed vote. “If they cared about inflation, a fight over Raskin would not be their top priority today – getting a vote on Powell, etc. would.”

The Banking Committee’s Republicans have repeatedly criticized Raskin and her previous work for Reserve Trust.

Late last week, Toomey said in a letter Raskin lobbied Kansas City Fed President Esther George in 2017 to advocate for the fintech company and its application for a special account at the central bank. The Fed previously denied Reserve Trust’s request for special access to the central bank’s payments system.

At the time she placed the call, Raskin had just left her role as the Treasury Department’s deputy secretary, a role she served in after more than three years at the Fed as one of its governors.

Following her personal intervention on the company’s behalf, the Kansas City Fed approved the company’s second request for an account in 2018. The Kansas City Fed claims that its reversal was not the result of Raskin’s call and that it followed all the usual protocols in evaluating Reserve Trust’s second application.

Republicans, who say they want more time to vet Raskin, do not suggest her action is illegal but that it is a flagrant example of the “revolving door” between politics and corporate interests. The revolving door model suggests that former government officials use their connections and clout in government to later lobby on behalf of businesses for a payout.

Toomey referenced those concerns in a statement Tuesday morning.

“Important questions about Ms. Raskin’s use of the ‘revolving door’ remain unanswered largely because of her repeated disingenuousness with the Committee,” Toomey said in a statement Tuesday morning.

“Committee Republicans aren’t seeking to delay her vote. We’re seeking answers,” he added.

Raskin, who received stock in Reserve Trust when she joined its board, sold her financial stake upon her 2019 departure from the company for about $1.5 million.

Reserve Trust’s exclusive master account remains the company’s single largest selling point to potential customers. It is the first thing the company says about itself on the homepage of its website.

This is breaking news. Please check back for updates.

St. Louis Federal Reserve President James Bullard made his case for a rapid move higher in interest rates, saying Monday that the central bank needs to react to accelerating inflation.

“I do think we need to front-load more of our planned removal of accommodation than we would have previously. We’ve been surprised to the upside on inflation. This is a lot of inflation,” Bullard told CNBC’s Steve Liesman during a “Squawk Box” interview.

“Our credibility is on the line here and we do have to react to the data,” he added. “However, I do think we can do it in a way that’s organized and not disruptive to markets.”

Those comments came after Bullard rattled markets last week by saying he thinks the Fed should raise its benchmark short-term borrowing rate a full percentage point by July. The position, in a Bloomberg News interview, sent stocks on a volatile ride and caused futures markets to price in as many as seven quarter-percentage point hikes by the end of 2022.

Along with that, markets are now tilting to a 50 basis point, or 0.5 percentage point, increase at the March meeting.

“I think my position is a good one, and I’ll try to convince my colleagues that it’s a good one,” Bullard told CNBC.

Stock market futures were mildly lower Monday morning as he spoke, rising from previous levels on some encouraging news out of the Russia-Ukraine hostilities.

While virtually all officials on the Federal Open Market Committee have expressed the desire to start raising rates in March, Bullard has been perhaps the most hawkish. Several other officials have said they think a quarter-point move at the upcoming meeting would suffice.

“History tells us with Fed policy that abrupt and aggressive action can actually have a destabilizing effect on the very growth and price stability we’re trying to achieve,” San Francisco Fed President Mary Daly said Sunday on CBS’ “Face the Nation.” “So, what I would favor is moving in March and then watching, measuring, being very careful about what we see ahead of us and then taking the next interest rate increase when it seems the best place to do that.”

But Bullard insisted that inflation has been running hot for months and the Fed needs to be forceful in using its tools to control price increases.

The consumer price index for January showed a 12-month increase of 7.5%, even more than Wall Street estimates and continuing a pattern that began in the back half of 2021.

“My interpretation was not so much that report alone, but the last four reports taken in tandem have indicated that inflation is broadening and possibly accelerating in the U.S. economy,” Bullard said.

Even with strong inflation gains, real incomes have been mostly declining as inflation is outpacing the rise in average hourly earnings.

“The inflation that we’re seeing is very bad for low- and moderate-income households,” he said. “People are unhappy, consumer confidence is declining. This is not a good situation. We have to reassure people that we’re going to defend our inflation target and we’re going to get back to 2%.”

Markets will get a look later this week into Fed thinking when the FOMC releases minutes from its January meeting. One area of interest will be in how the central bank will begin reducing the nearly $9 trillion in asset holdings, which doubled during the coronavirus pandemic as the Fed bought up trillions in Treasurys and mortgage-backed securities.

Despite the inflation surge, the Fed intends to buy $20 billion more of Treasurys over the next month along with nearly $28 billion in MBS, before ending the program in March.

Bullard said he’d like to see a reduction in the bond holdings to begin in the second quarter with “some plan B in our pocket” where the Fed might actually sell the assets outright rather than letting proceeds run off passively.

Correction: San Francisco Fed President Mary Daly spoke on CBS’ “Face the Nation.” An earlier version misstated the network.

Several Federal Reserve officials, both privately and publicly, are pushing back against calls by St. Louis Fed President Jim Bullard on Thursday for super-sized rate hikes, and instead suggesting the central bank is likely to embark initially on a more measured path.

The comments of these officials suggest markets may have wrongly interpreted Bullard’s remarks as being more widely held than they are by Fed officials and leadership.

Atlanta Fed President Raphael Bostic told CNBC on Thursday after the inflation report, “My views have not changed” for three or four rate hikes this year, likely beginning with a 25 basis point increase. That was the same view he gave CNBC on Wednesday before the inflation report. (One basis point equals 0.01%.)

After the report showed the consumer price index rose 7.5% year over year, a fresh 40-year high, Bullard told Bloomberg he wanted to see 100 basis points of tightening “in the bag” by July, including the possibility of a 50 basis point rate hike and even potentially an intermeeting move.

Stocks, which had actually shrugged off the inflation report, sold off sharply in the wake of Bullard’s comments and bond yields soared. The 25 basis point move in the 2-year yield was the largest one-day increase since the global financial crisis in 2009. Markets priced in near certainty of a 50 basis point hike in March, even though Bullard himself said he was undecided about such a move.

Later that day, Richmond Fed President Tom Barkin said in a speech that “I’d have to be convinced” of the need for a 50 basis point rate hike, saying there may be a time for that, but it did not appear to be now.

San Francisco Fed President Mary Daly said after the inflation report that a 50-basis-point hike is “not my preference.”

CNBC reporting found that several Fed officials were already looking for a bad inflation number and the January report was not substantially worse than expected. Improvement is not expected until midyear and only then, if it remains high and rising and does not respond to rate hikes and plans for balance sheet reduction, would these officials want to accelerate the pace of tightening.

There are still about five weeks before the March meeting, including another inflation report, and the situation could change. But key officials, even after the inflation data, continue to hold to an outlook for measured tightening.

President Joe Biden on Thursday touted wage growth and forecasts for tapering inflation even after a new report showed that prices are still rising at their fastest clip in 40 years.

“While today’s report is elevated, forecasters continue to project inflation easing substantially by the end of 2022,” Biden said in a press release. “And fortunately we saw positive real wage growth last month, and moderation in auto prices, which have made up about a quarter of headline inflation over the last year.”

“We will continue to fight for costs in areas that have held back families and working people for decades, from prescription drugs to child care and elder care to their energy costs,” he added.

The president’s remarks came about two hours after the Labor Department reported that prices facing U.S. consumers rose 7.5% in the 12 months through January, the hottest annualized pace since 1982. Excluding volatile gas and grocery costs, the CPI increased 6%, compared with the estimate of 5.9%. Core inflation rose at its fastest level since August 1982.

Inflation has over the past several months evolved into one of the administration’s chief economic problems as rising prices at the gas pump and at the grocery store chip away at Americans’ wallets. Without proportional wage increases, inflation erodes consumers’ purchasing power and leaves households with lower real incomes.

The White House has limited powers at its disposal to curb price increases, including tapping the strategic petroleum reserve, shoring up U.S. supply chains and encouraging workers to return to work as soon as possible.

While investments in American infrastructure supported by the Biden administration may work to lower prices in the long term, the White House doesn’t have many options to check prices in the near term. Instead, Biden and Treasury Secretary Janet Yellen have in recent weeks said they agree with the Federal Reserve’s likely move to tighten monetary policy and raise interest rates to keep inflation at bay.

The Fed is empowered by Congress to adjust interest rates to maximize employment and stabilize prices. If the central bank views the economy as too hot, it can raise borrowing costs across the economy to curb spending.

Market forecasters are virtually certain the Fed will hike rates at its March meeting and continue to do so throughout 2022.

“The Federal Reserve provided extraordinary support during the crisis for the previous year and a half,” Biden said on Jan. 19. “Given the strength of our economy and pace of recent price increases, it’s appropriate — as Fed Chairman Powell has indicated — to recalibrate the support that is now necessary.”

Yellen echoed her boss’s thoughts a day later.

“I expect inflation throughout much of the year – 12-month changes – to remain above 2%,” she said at the time. “But if we’re successful in controlling the pandemic, I expect inflation to diminish over the course of the year and hopefully revert to normal levels by the end of the year around 2%.”

Consumer prices surged more than expected over the past 12 months, indicating a worsening outlook for inflation and cementing the likelihood of substantial interest rate hikes this year.

The consumer price index for January, which measures the costs of dozens of everyday consumer goods, rose 7.5% compared with a year ago, the Labor Department reported Thursday.

That compared with Dow Jones estimates of 7.2% for the closely watched inflation gauge. It was the highest reading since February 1982.

Stripping out volatile gas and grocery costs, the CPI increased 6%, compared with the estimate of 5.9%. Core inflation rose at its fastest level since August 1982.

The monthly CPI rates also came in hotter than expected, with headline and core CPI both rising 0.6%, compared with the estimates for a 0.4% increase by both measures.

Stock market futures declined following the report, with rate-sensitive tech stocks hit especially hard. Government bond yields rose sharply, with the benchmark 10-year Treasury note touching 2%, its highest since August 2019.

Markets also got more aggressive in pricing rate hikes ahead.

The chances of a 0.5 percentage point Fed rate increase in March rose to 44.3% following the data release, compared with 25% just before, according to CME data. Chances of a sixth quarter-percentage point hike this year rose to about 63%, compared with about 53% before the release.

“With another surprise jump in inflation in January, markets continue to be concerned about an aggressive Fed,” said Barry Gilbert, asset allocation strategist at LPL Financial. “While things may start getting better from here, market anxiety about potential Fed overtightening won’t go away until there are clear signs inflation is coming under control.”

The inflation numbers come at a crossroads for the U.S. economy, with 2021’s rapid growth pace expected to slow this year as fiscal and monetary stimulus fades. Growth is still expected to be above trend, though sharper rate increases from an inflation-fighting Fed could prove troublesome.

On a percentage basis, fuel oil rose the most in January, surging 9.5% as part of a 46.5% year-over-year increase. Energy costs overall were up 0.9% for the month and 27% on the year.

Vehicle costs, which have been one of the biggest inflation contributors since they began surging higher in the spring of 2021, were flat for new models and up 1.5% for used cars and trucks in January. The two categories have posted respective increases of 12.2% and 40.5% over the past 12 months.

Shelter costs, which make up about one-third of the total CPI number, increased 0.3% on the month, which is the smallest gain since August 2021 and slightly below December’s rise. Still, the category is up 4.4% over the past year and could keep inflation readings elevated in the future.

Food costs jumped 0.9% for the month and are up 7% over the past year.

That combination of higher food and housing prices “underlines our view that a rapid cyclical acceleration in inflation is underway and, with labor market conditions exceptionally tight, it is unlikely to abate any time soon,” wrote Andrew Hunter, senior U.S. economist at Capital Economics.

“While we still expect more favorable base effects and a partial easing of supply shortages to push core inflation lower this year, this suggests it will remain well above the Fed’s target for some time,” he added.

The burst in inflation has muted the sizeable earnings growth workers have seen. Real average hourly earnings rose just 0.1% for the month, as the 0.7% monthly gain in wages was almost completely wiped out by the 0.6% inflation gain.

A separate report Thursday showed that weekly jobless claims totaled 223,000 for the week ended Feb. 5, a decline of 16,000 from the previous week and below the 230,000 estimate. It was the lowest total since Jan. 1.

Continuing claims, which run a week behind, held at 1.62 million. The total of those receiving benefits under all programs rose slightly to about 2.1 million, according to Labor Department data through Jan. 22.