U.S. consumer prices were unchanged in January, as the rising costs of housing and health care were largely offset by cheaper oil.
But the annual pace of inflation showed signs of acceleration. The Labor Department said Friday that prices have risen 1.4 percent over the past 12 months, compared to a year ago when annual inflation was close to zero. Consumer prices climbed at the fastest annual rate since October 2014.
Core inflation, which excludes volatile energy and food costs, rose 0.3 percent in January. Over the past 12 months, this category closely watched by the Federal Reserve has climbed 2.2 percent.
The rising tempo for inflation follows a Fed decision in December to raise a key short-term interest rate for the first time in nearly a decade.
Jennifer Lee, a senior economist at BMO Capital Markets, said that January’s report on consumer prices affirms the Fed’s decision and raises the potential for further rate increases later this year.
“In a way, this justifies the December rate hike and keeps the Fed at the rate-hike table,” she said.
The Fed is closely following inflation, looking for assurance that it will accelerate to 2 percent in its preferred measure. That particular measure of personal consumption. It posted a modest annual increase of 0.6 percent in December.
Fed officials have said they are increasingly unsure about the path of inflation after raising a key interest rate in December from a record low set in late 2008. The quarter-point increase pushed the federal funds rate from near zero to a range of 0.25 percent to 0.5 percent.