In January, consumer prices posted its biggest month-over-month gain since August 2011. Inflation, along with a better labor market, puts a Fed rate hike back on the table. Shartia Brantley reports.
Consumers may have made resolutions to spend less in 2016, but they are actually spending more on things like cars, clothing, rent and medical care. That's according to the Labor Department's consumer price index report, which showed consumer prices rising by 0.3 percent in January. This is the biggest month-over-month increase in nearly four and a half years. Inflation pressure, coupled with a stronger labor market, puts gradual interest rate hikes by the Federal Reserve back on the table. The Fed hiked rates for the first time in nearly a decade in December. Bank of Tokyo-Mitsubishi's Chris Rupkey: SOUNDBITE: CHRIS RUPKEY, CHIEF FINANCIAL ECONOMIST, BANK OF TOKYO-MITSUBISHI IN (ENGLISH) SAYING: "The labor market is strong and now it looks like inflation pressures are picking up a little bit, so, I think, Fed funds rate is pretty low, maybe they should move it up a little bit." Recently, volatility in the U.S. and foreign stock markets, along with slow growth concerns in China and Europe, had lessened the probability of an interest rate hikes this year. The Fed's primary report on inflation, the PCE price index report, is due next week. Rupkey says, he expects the PCE price index to move higher, given the sharp increase in consumer prices.