Overall U.S. consumer prices were unchanged in January, as various rising costs were offset by cheaper petroleum, but underlying inflation rose by the most in more than four years, the government reported, indicating an increase in price pressures that could allow the Federal Reserve (Fed) to gradually lift interest rates this year. The Labor Department said its consumer price index (CPI) was flat last month after falling 0.1 percent in December. Over the past 12 months, CPI has risen 1.4 percent, the biggest year-over-year rise since autumn of 2014. Core CPI, which excludes volatile energy and food costs, rose 0.3 percent in January, the biggest gain since August 2011 and up from a 0.2 percent increase in December. In the 12 months ending in January, core CPI advanced 2.2 percent, the largest increase since June 2012. Housing expenses—which account for one-third of the CPI—were up 3.2 percent from a year ago, while medical services have advanced 3.3 percent. In January, medical costs rose 0.5 percent, with prices for prescription drugs also increasing 0.5 percent, and hospital costs gaining 0.4 percent. Prices also rose for airplane tickets, clothing, and autos, while food costs were flat. The combination of a strong U.S. dollar and cheaper oil has suppressed inflation across much of the economy. Retail gasoline prices have fallen 24 percent over the past year to a national average of $1.72 a gallon (3.8 liters). At the same time, weakness in global economic growth has lifted the value of the dollar, making foreign imports cheaper. The Fed has a 2 percent annual inflation target and has been closely monitoring a price measure that is running well below the core CPI. Inflation is being watched for clues on whether the central bank would continue raising interest rates this year after it increased borrowing costs in December for the first time in almost a decade.
