The January 2025 Consumer Price Index of All Urban Consumers (CPI-U) report indicates that inflation increased by 0.5% for the month, surpassing December’s 0.4% rise. These data were released at 8:30 am EST on Wednesday, February 12, 2025, by the Bureau of Labor Statistics. Before seasonal adjustment, the year-over-year (Y-o-Y) inflation rate in the all-items index grew by 3.0%, up from 2.9% in December and 2.7% and 2.6% in November and October.
The magnitude of the strength was largely unexpected, as the results easily surpassed economists’ consensus estimates. The table below is courtesy of Investing.com. The left column represents January’s figures, while the right column represents forecasters’ expectations. As you can see, the green metrics highlight January’s outperformance.
The data is likely an unwelcome sign for Fed Chairman Jerome Powell, as he’s shifted his stance in a hawkish direction recently. He said on Feb. 11:
“With our policy stance now significantly less restrictive than it had been and the economy remaining strong, we do not need to be in a hurry to adjust our policy stance. We know that reducing policy restraint too fast or too much could hinder progress on inflation.”
Thus, with January’s results amplifying that message, it could be a while before investors receive the rate cuts they desire.
Used cars and trucks were primary outliers again this month, with energy-related items like gasoline, fuel oil, and utilities also recording significant MoM increases. Likewise, food inflation was the highest in five months.
Core inflation (which excludes the impacts of food and energy), rose by 0.4% in January, a jump from December’s 0.2% print. And despite the decline in real-time rents, shelter rose by 0.4% MoM and accounted for “nearly 30 percent of the monthly all items increase.”
Food Prices
The food index hit a five-month high in January, and four of the six major grocery store food indexes increased:
- Cereals and bakery products (-0.4%)
- Meats, poultry, fish, and eggs (+1.9%)
- Dairy and related products (+0.3%)
- Fruits and vegetables (-0.5%)
- Nonalcoholic beverages (+0.9%)
- Other food at home (+0.3%)
In addition, the food away from home index rose by 0.2%, as restaurant inflation slowed in January.
Energy Prices
The energy index rose by 1.1% in January, with gasoline and natural gas up by 1.8%, respectively, while electricity was flat.
Core CPI January 2025
The January core CPI rose by 0.4% month-over-month and 3.3% Y-o-Y. Below is an itemized breakdown of the main price fluctuations seen in the core CPI reading:
- Shelter index: (+0.4%) [December: +0.3%]
- Rent index: (+0.3%) [December: +0.3%]
- Owners’ equivalent rent: (+0.3%) [December: +0.3%]
- Motor vehicle insurance: (+2.0%) [December: +0.4%]
- Medical care services: (+0.0%) [December: +0.2%]
- Physician services: (+0.1%) [December: +0.1%]
- Hospital services: (+0.9%) [December: +0.2%]
- Airline fares: (+1.2%) [December: +3.9%]
Seasonally Unadjusted CPI Data for January 2025
Before seasonal adjustments, the CPI-U for January 2025 increased by 3.0% Y-o-Y to an index level of 317.671. Since these figures are unadjusted, they include regular seasonal price fluctuations that can create volatility in the results.
Seeking Shelter
With inflation refusing to recede, the financial markets remain unnerved at the prospect of higher-for-longer interest rates. However, one sign of hope is the eventual decline of rental inflation.
The shelter CPI accounts for more than 30% of the headline CPI’s movement, and Apartment List noted on Jan. 27:
‘Our national rent index started the year with its sixth straight month-over-month decline, falling by 0.2 percent in January. Year-over-year growth also remains negative at -0.5 percent, but is slowly inching back toward positive territory.”
The report added:
“The Apartment List National Rent Index has proven to be a strong leading indicator of the CPI housing and rent components (collectively referred to as “shelter”), since our index captures price changes in new leases, which are only later reflected in price changes across all leases (what the CPI measures)….
“Despite the progress, shelter CPI remains elevated and is one of the key factors continuing to exert upward pressure on topline CPI. In fact, if you strip out shelter, the remainder of the CPI price basket has increased by just 1.9 percent year-over-year as of December, right in line with the Fed’s long-term 2 percent inflation target. As shelter inflation continues to trend down, it will help improve the overall inflation picture.”
Consequently, while January’s CPI print worsened the inflation outlook, there are some positive signs that could flip the script in the months ahead.
In the meantime, while some assets have suffered recently, as higher interest rates on risk-free assets like Treasury bonds make risky assets like stocks seem less attractive, gold has shined bright. Moreover, the World Gold Council noted on Feb. 10 that gold’s “record-breaking performance attracted investor attention.”
An excerpt read:
“European funds saw their largest monthly inflow since March 2022, adding US$3.4bn during January. UK and Germany dominated inflows. In the UK, government bond yields fell notably during the second half of January as easing inflation pressure and soft economic data prints raised investor expectations for rate cuts from the Bank of England during 2025. Reduced opportunity cost of holding gold, alongside a robust gold price performance, drove local investors into gold ETFs.”
As such, more upside could materialize as inflation, geopolitical uncertainty, and tariff concerns fester throughout 2025.
Are you thinking about diversifying into precious metals? Talk to your financial advisor about initiating a gold IRA account today, allowing you to invest in this red-hot asset on a tax-advantaged basis. Additionally, our complimentary CPI inflation calculator remains at your disposal, enabling you to assess inflation’s impact on your finances. Remember, seek the guidance of a financial advisor before making any investment decision.
Alex Demolitor is a Canadian financial writer hailing from Halifax, NS. Alex has a Bachelors Degree from King's College and passed the CFA Exam Level III. He specializes in fundamental analysis of the stock, bond, commodity, and FX markets. He also covers US & Canadian economic indicators.
