CPI Report Shows Inflation Cooling, But Labor Market Still Weak

US Consumer Price Index Falls for Seventh Consecutive Month

The Consumer Price Index (CPI), a measure of inflation, fell for the seventh consecutive month in January, according to data released by the Bureau of Labor Statistics. The index declined by 0.2% over the month, and by 6.4% over the past year, the lowest level since October 2021.

Cooling Inflation, But Labor Market Concerns

While the decline in inflation is good news, the labor market remains a concern. The unemployment rate ticked up to 4.1% in January, up from 3.9% in December. This suggests that the Federal Reserve's aggressive interest rate hikes are starting to take a toll on the economy.

"The CPI report shows that inflation is cooling, but the labor market is still weak," said economist Andrew Hunter of Capital Economics. "This keeps the Fed on track to halt its rate hikes, but it also shows that persistently high inflation is taking a toll on the economy."

Outlook for 2023

The Fed has indicated that it will continue to raise interest rates until inflation falls back to its target of 2%. However, the labor market is expected to weaken further in the coming months, as the economy slows down. This could make it difficult for the Fed to achieve its inflation goal without causing a recession.