US inflation accelerated to 3% in January, up from 2.9% in December and a three-and-a-half-year low of 2.4% in September, according to data released by the Labor Department. The core consumer price index, which excludes volatile food and energy costs, rose 3.3% over the past 12 months. Egg prices surged 15.2%, driven by an avian flu epidemic.
The figures emerged as Federal Reserve Chair Jerome Powell faced a second day of questioning on Capitol Hill, where lawmakers pressed him on the central bank’s independence, the role of Elon Musk’s Department of Government Efficiency (DOGE), and recent comments by President Donald Trump. Powell affirmed the Fed’s independence, stating that “politicians who want to be re-elected … are not going to be focused on the longer term,” and that the understanding of independent central banking is uniform across developed economies. He added that the Fed has had no contact with DOGE.
On inflation, Powell said, “We’re close but not there.” He declined to comment on President Trump’s social media posts, in which Trump wrote, “BIDEN INFLATION UP!” and called for interest rates to be lowered “hand in hand with upcoming Tariffs.” Powell insisted the Fed would continue to make decisions based on economic data.
The Federal Reserve cut rates three times last year following a series of aggressive hikes to combat post-Covid inflation. However, Powell signalled caution, stating, “We don’t see any reason to be in a hurry.” The Trump administration has imposed 10% tariffs on Chinese goods and announced 25% tariffs on steel and aluminium imports starting in March, raising investor concerns about further price increases.
US stock markets were lower on the day, with the Dow Jones Industrial Average down 224 points, while the Nasdaq, S&P 500, and Russell 3000 also declined. High inflation previously hurt the Democrats in the 2024 election, and President Trump campaigned on a promise to reduce prices.
