U.S. consumers flush with the COVID pandemic aid payments that flowed from the government in 2020 and 2021 flocked to auto lots and drove vehicle prices to sky-high levels.
The U.S. Labor Department is due to release its Consumer Price Index report for January at 8:30 a.m. EST . Economists polled by Reuters expect the pace of price increases slowed to an annual rate of around 6.2%, compared to 6.5% in December and a recent peak of around 9% in June.
At this point, between improving supply chains and changes in consumer behavior from the outset of the pandemic, the Fed feels it has won the battle when it comes to most goods: On average, outside of food and energy products that are driven by global commodity costs, prices of products have been falling recently and detracting from overall inflation.
"So far, we don't see that. And I think until we do, we see ourselves as having a lot of work left to do," in raising interest rates and restricting credit as much as needed to ensure inflation falls broadly and sustainably, Powell said.For the purpose of calculating inflation, "housing" is considered a service.
Personal consumption expenditures data as of December show that services outside of energy and housing were contributing about 1.9 percentage points on an annualized basis to headline PCE inflation, nearly consuming all of the Fed's target inflation rate even if all other prices were steady. While that is down from nearly 3 percentage points in August, it represented an increase over the prior month.
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