Consumer Prices Increase, Real Wages Fall

Further increases in the target federal funds rate are increasingly data dependent, but there's nothing in this inflation report to indicate the Fed will pause at its next meeting. Inflation is up 4% over a year ago largely due to higher enrgy prices. This will keep energy cost pass-through concerns heightened. However, core inflation is better behaved increasing 2.1% which is down from a 2.2% year over year increase last month. Also, though it isn't grabbing the headlines, average weekly earnings of workers adjusted for inflation fell once again:

Consumer Prices Jumped 0.7% As Food, Energy Costs Climbed, WSJ: Consumer prices surged last month on higher energy and food costs but underlying price pressures remained largely contained. The ... consumer price index rose by a seasonally adjusted 0.7% in January after decreasing 0.1% in December. The ... core index, which excludes food and energy, climbed 0.2%, after a 0.1% rise the previous month. ...

Consumer prices stood 4% higher than a year ago. Core prices rose a more modest 2.1% in the 12 months ending January. Some economists say that quirks in the calculation of the CPI may be causing inflation to be overstated during the winter and understated in the rest of the year. The quirk appears only in the total index, not the core index... Though core inflation remains at what is thought to be the high end of the Fed's comfort zone, Wednesday's data suggest price pressures haven't yet taken firm hold throughout the economy, which may ease concerns of some Federal Reserve policy makers. ...

In a separate report, the Labor Department reported that worker wages lost traction against the increase in prices. The average weekly earnings of U.S. workers, adjusted for inflation, fell 0.2% in January...