CNBC: Inflation Rises 7.5% Over the Past Year, Even More Than Expected and the Highest Since 1982

Article by Jeff Cox in CNBC

Consumer prices surged more than expected over the past 12 months, indicating a worsening outlook for inflation and cementing the likelihood of substantial interest rate hikes this year.

The consumer price index for January, which measures the costs of dozens of everyday consumer goods, rose 7.5% compared to a year ago, the Labor Department reported Thursday.

That compared to Dow Jones estimates of 7.2% for the closely watched inflation gauge. It was the highest reading since February 1982.

Stripping out volatile gas and grocery costs, the CPI increased 6%, compared to the estimate of 5.9%. Core inflation rose at its fastest level since August 1982.

The monthly CPI rates also came in hotter than expected, with headline and core CPI both rising 0.6%, compared to the estimates for a 0.4% increase on both measures.

Stock market futures declined following the report, with rate-sensitive tech stocks hit especially hard.

The chances of a 0.5 percentage point Fed rate hike in March rose to 44.3%following the data release, compared to 25% just before, according to CME data. Chances of a sixth quarter-percentage-point hike increased to about 63%, compared to about 53% before the release.

“With another surprise jump in inflation in January, markets continue to be concerned about an aggressive Fed,” said Barry Gilbert, LPL Financial asset allocation strategist. “While things may start getting better from here, market anxiety about potential Fed overtightening won’t go away until there are clear signs inflation is coming under control.”

Food, shelter costs up sharply

On a percentage basis, fuel oil rose the most in January, surging 9.5% as part of a 46.5% year-over-year increase. Energy costs overall were up 0.9% for the month and 27% on the year.

Food costs jumped 0.9% for the month and are up 7% over the past year.

That combination of higher food and housing prices “underlines our view that a rapid cyclical acceleration in inflation is underway and .......

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