By Scott Kanowsky
Investing.com -- Consumer prices in the U.S. grew at a slower pace in January, but the uptick was still above forecasts, as policymakers at the Federal Reserve look for clues that its recent slew of interest rate hikes are working to quell inflation.
Labor Department data on Tuesday showed that, on an annual basis, the consumer price index for the month dipped to 6.4% from 6.5% in December - the seventh straight month of decelerating expansion. Analysts had expected a reading of 6.2%.
The year-on-year core figure, which takes out volatile items like energy and food, came in at 5.6%, down from 5.7% in the prior month and ahead of economists' predictions of 5.5%. The core number is closely eyed by many economic observers, including Fed officials, who believe that it provides a more accurate assessment of the future direction of inflation.
On a monthly basis, the index rose by a seasonally adjusted 0.5%, in line with estimates, partly reflecting an uptick in energy prices. The core number increased by 0.4%.
The Fed has aggressively raised borrowing costs from near-zero to a target range of between 4.5% to 4.75% in less than a year, as the U.S. central bank aims to bring down soaring prices. Despite unveiling a smaller 25-basis-point hike at its last policy meeting, Fed chair Jerome Powell has warned that rates may need to stay higher for longer given data showing resilient labor market strength.
This tightness along with signs that inflation has both peaked and is slowly ebbing back down to the Fed's 2% have sparked hopes that the U.S. economy may be able to dodge a recession even as elevated rates threaten to dampen activity. But Fed officials have warned that this outcome is still far from certain.