Consumer prices rose 3.1% in January compared with a year ago, slowing markedly from the previous month but missing expectations for an even greater cooling, a Bureau of Labor Statistics report released Tuesday showed. .

Still, falling inflation was good news for the Federal Reserve as it weighs interest rate cuts.

Core inflation, a closely watched measure that excludes volatile food and energy prices, rose 3.9% over the year ended in January, matching the cooling of the previous month.

The report from the US Bureau of Labor Statistics comes after a slight acceleration in price increases in December.

That jump in inflation had complicated the Federal Reserve’s plans to scale back its fight against inflation with a series of interest rate cuts this year.

Less than two weeks ago, the central bank decided to leave interest rates unchanged, opting to watch for stronger economic performance before reversing a near-historic series of rate hikes that began last year.

The slowdown in inflation in January is a positive sign for the Federal Reserve ahead of its next rate decision in March.

Inflation has fallen sharply from its peak last year, but remains nearly a percentage point above the Federal Reserve’s target.

The U.S. economy has largely defied the central bank’s efforts to slow the economy by raising borrowing costs for households and businesses.

The economy far exceeded expectations, adding 353,000 jobs last month and keeping the unemployment rate steady at a historically low 3.7%, according to data released by the U.S. Bureau of Labor Statistics earlier this month. month.

PHOTO: Federal Reserve Chairman Jerome Powell holds a press conference following the release of the Federal Reserve's interest rate policy decision, January 31, 2024.

Federal Reserve Chairman Jerome Powell holds a press conference following the release of the Federal Reserve’s interest rate policy decision on January 31, 2024.

Evelyn Hockstein/Reuters, FILE

Gross domestic product performed much better than expected late last year, a report this month showed, while consumer confidence soared in January.

However, the successful performance could pose a challenge to the fight against inflation undertaken by the Federal Reserve authorities.

The Federal Reserve risks a spike in inflation if it cuts interest rates too quickly, as increased consumer demand could lead to an acceleration in price increases.

Speaking in Washington, DC, late last month, Federal Reserve Chairman Jerome Powell celebrated the steady decline in inflation in recent months and welcomed the strong hiring that occurred in parallel. However, he warned of the risks posed by an economy that gets too hot.

“We are not looking for a weaker labor market,” Powell said. “We expect inflation to continue to fall, as it has been falling for the last six months.”

“We’re not going to claim victory right now,” he added later. “We think we have a long way to go.”

By Sam