(NEW YORK) — Consumer prices rose 6.4% last month compared to a year ago, continuing a months-long slowdown of price increases despite blockbuster job growth that revealed an economy running hotter than expected, government data on Tuesday showed.
The data marked the seventh consecutive month of smaller price hikes. In December, year-over-year inflation was 6.5%.
Inflation has fallen significantly from a summer peak but is more than triple the Federal Reserve’s target of 2%.
The Fed earlier this month imposed the latest in an aggressive string of borrowing cost increases as it tries to slash price hikes by slowing the economy and choking off demand. The approach, however, risks tipping the U.S. economy into a recession.
So far, the economy has largely defied an anticipated slowdown.
The economy added a staggering 517,000 jobs in January, more than double the employment growth a month prior and well above the breakneck pace of some 400,000 monthly jobs added on average last year, according to government data released earlier this month.
In turn, the unemployment rate fell to 3.4%, the lowest figure since 1969.
Federal Reserve Chair Jerome Powell said last week that the central bank’s fight against inflation has “a long way to go,” citing the jobs data.
Speaking at The Economic Club of Washington, D.C., Powell said the “extraordinarily strong” job figures took the Fed by surprise.
“It kind of shows you why we think this will be a process that takes a significant period of time,” he added.
Still, the Fed has transitioned to a slower pace of rate hikes in recent months, suggesting confidence that the central bank has begun to tame inflation.
Over the next three years, consumers expect inflation to fall to 2.7%, hovering just above the central bank’s target, the New York Federal Reserve found in a survey released on Monday.
The combination of strong hiring and easing inflation has buoyed hopes among some economists that the U.S. could avert a recession.
A report released by the International Monetary Fund last month predicted that U.S. economic growth would cool to 1.4% this year from 2% last year, but it found the U.S. could avoid a downturn.
Treasury Secretary Janet Yellen rejected recession fears in an interview last Monday with ABC News’ Good Morning America, saying the economy remains “strong and resilient.”
Many consumers, however, remain pessimistic.
Four in 10 Americans say they’re worse off financially since Biden became president, according to an ABC News/Washington Post poll released earlier this month. The figure marks the highest share of discontented respondents since the outlets began conducting the poll 37 years ago.
Home sales fell for the 11th consecutive month in December, reaching their lowest rate since November 2010, according to the National Association of Realtors.
Meanwhile, U.S. retail sales fell in December, ending the typically busy holiday shopping season with a whimper.
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