WASHINGTON (AP) — An inflation gauge closely monitored by the Federal Reserve moved higher in January in the latest sign that prices were persistently elevated even before the Iran war caused spikes in oil and gas costs.
Prices rose 2.8% in January compared with a year earlier, the Commerce Department said Friday, slightly below December’s increase in a report that was delayed by last fall’s six-week government shutdown. The shutdown created a backlog of data that is nearly cleared.
Yet excluding the volatile food and energy categories — which the Fed pays closer attention to — core prices rose 3.1%, up from 3% in the prior month and the highest in nearly two years.
On a monthly basis, prices rose 0.3% in January, while core prices jumped 0.4% for the second straight month, a pace that if sustained would lift inflation far above the 2% annual target set by the Fed.
The data has since been overtaken by the war with Iran, which began Feb. 28 and has shut down the Strait of Hormuz, cutting off one-fifth of the world’s oil supply. Oil prices have soared more than 40% since the war began and gas prices have jumped to $3.60 a gallon from just under $3 a month earlier, according to AAA. Those figures will likely cause inflation to spike in March and potentially April, economists forecast.
The inflation-fighters at the Fed have kept their key interest rate elevated to slow borrowing, spending, and growth in an effort to cool inflation further. Fed policymakers meet next week and are widely expected to keep their rate unchanged given that the conflict in the Middle East will raise inflation, at least in the short run.
The report also showed that consumers lifted their spending at a solid 0.4% pace in January, matching December's rise and a sign that Americans are still able to drive steady growth. Consumer spending powers about two-thirds of the economy.
Incomes also rose 0.4%, a positive sign that consumers didn't have to dip into savings to propel spending in January. After-tax incomes jumped 0.9%, fueled by a large increase in Social Security benefit payments after a large cost of living adjustment took effect at the start of the year.
Friday's report includes the personal consumption expenditures price index, which is separate from the more widely-followed consumer price index, which was reported on Wednesday. The PCE index is running hotter than the CPI, largely because it puts much less weight on rental costs, which have been cooling steadily in recent months.
The PCE index typically runs below the CPI, but has pulled ahead of it just in the past few months.
Copyright 2026 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.
Please purchase a Premium Subscription to continue reading.
To continue, please log in, or sign up for a new account.
We offer one free story view per month. If you register for an account, you will get two additional story views. After those three total views, we ask that you support us with a subscription.
A subscription to our digital content is so much more than just access to our valuable content. It means you’re helping to support a local community institution that has, from its very start, supported the betterment of our society. Thank you very much!
Only subscribers can view and post comments on articles.
Already a subscriber? Login Here
“Powerful, moving, and exhilarating” Read moreSongs For A New World
All are invited to attend this silent, unprogrammed meeting where we listen for the spirit o… Read moreSan Mateo Quakers
Join us for this fun community gathering. There will be a resource fair, music and a raffle.… Read moreBelmont Senior Showcase
Art Without An Artist: Can AI Be Considered An Artist? Read moreART WITHOUT AN ARTIST: Can AI be Considered an Artist?
Exclusive film screening in San Mateo Read moreA LITTLE FELLOW: THE LEGACY OF A.P.GIANNINI
CA Is Burning said:
CA Is Burning said:
Success! An email has been sent to with a link to confirm list signup.
Error! There was an error processing your request.
Sorry, an error occurred.
Already Subscribed!
Cancel anytime
Thank you .
Your account has been registered, and you are now logged in.
Check your email for details.
Submitting this form below will send a message to your email with a link to change your password.
An email message containing instructions on how to reset your password has been sent to the email address listed on your account.
No promotional rates found.
Secure & Encrypted
Thank you.
Your gift purchase was successful! Your purchase was successful, and you are now logged in.
| Rate: | |
| Begins: | |
| Transaction ID: |
A receipt was sent to your email.
(0) comments
Welcome to the discussion.
Log In
Keep the discussion civilized. Absolutely NO personal attacks or insults directed toward writers, nor others who make comments.
Keep it clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
Don't threaten. Threats of harming another person will not be tolerated.
Be truthful. Don't knowingly lie about anyone or anything.
Be proactive. Use the 'Report' link on each comment to let us know of abusive posts.
PLEASE TURN OFF YOUR CAPS LOCK.
Anyone violating these rules will be issued a warning. After the warning, comment privileges can be revoked.