US inflation likely picked up in January as prices for a wide range of goods and services soared further amid continued shortages and supply chain disruptions.

The Consumer Price Index (CPI) released Thursday morning by the Bureau of Labor Statistics is expected to register an annual gain of 7.2% in January, according to consensus data from Bloomberg. This would represent the fastest rise since 1982, as well as an acceleration from the 7.0% year-over-year increase seen in December. Month-over-month, however, consumer price increases likely moderated slightly to a 0.4% rise, compared to the 0.6% monthly jump seen at the end of 2021.

Contributions to headline inflation inflation are expected to be broad-based, reflecting widespread price pressures that are still filtering through the recovering economy.

“We are watching three factors: costs associated with labor – which is most important to us – food prices, and of course energy,” said Eva Teens, chief investment strategist at ERShares. , Yahoo Finance Live said on Wednesday.

Energy prices were a key contributor to the headline CPI and rose more than 29% year over year in December, although prices were down slightly from November. Natural gas prices jumped to a record high in January and crude oil prices rose above $90 a barrel for the first time since 2014, suggesting further contributions from the January CPI energy index.

“Energy prices are boosted by higher oil prices, while vehicle prices are driven by a continued shortage of chips,” Rubeela Farooqi, chief U.S. economist for High Frequency Economics, wrote on Wednesday. . “Meanwhile, rents will likely continue to come under upward pressure from high house prices, which are impacting affordability and driving rental demand.”

And even excluding more volatile food and energy prices, core CPI is expected to rise 5.9% in January from a year ago, also marking the biggest jump since 1982. Core CPI rose 5.5% in December.

However, other categories of consumers most vulnerable to virus-related disruptions may have seen prices drop temporarily in January, as Omicron cases hit a record high in the United States earlier this year. This could be particularly visible in the travel-related components of the CPI, including air fares and accommodation away from home.

“While we didn’t see much of an impact on Omicron’s December prices, this was likely due to the holidays. With new cases peaking nationwide in mid-January after the holidays, demand travel could have been particularly affected,” Deutsche Bank economist Jiefu Luo wrote in a note on Tuesday. “Recall that these categories fell 2.7% and 8.6% last August due to the Delta Wave disruptions.”

People shop at a supermarket in Glendale, California on January 12, 2022. – The 7% increase in the Labor Department’s consumer price index (CPI) in the 12 months to December has was the highest since June 1982, as prices rose for an array of goods, including housing, cars and food. (Photo by Robyn Beck/AFP) (Photo by ROBYN BECK/AFP via Getty Images)

Inflation and the Fed

For investors, the latest CPI will serve as a key update on whether inflation has continued to be high enough to warrant a faster shift to more hawkish monetary policy from the Federal Reserve. Although the Fed’s dual mandate dictates promoting both maximum employment and price stability, the latter component has taken on increased importance as inflation continues to accelerate to new multi-decade highs.

“We expect price metrics to begin to moderate over the next few months,” added Farooqi of High Frequency Economics. “However, January results in line with our estimates would confirm that consumer prices are accelerating for now and keep officials on track to raise rates at the March FOMC meeting.”

Namely, many market participants are now bracing for the Federal Reserve to begin raising interest rates from current levels near zero beginning in March before completing a series of seven total rate hikes in during the year, according to some Wall Street experts. However, other market participants and Fed officials themselves have suggested a less aggressive path, and Atlanta Fed President Raphael Bostic told CNBC on Wednesday he expects three or four rate hikes in 2022.

But Fed officials have become increasingly wary of the threat of continued price increases and consumer expectations of further inflation becoming entrenched. At the end of January, Fed Chairman Jerome Powell acknowledged that since the end of last year, the inflation situation was “probably slightly worse”.

The Federal Reserve is due to meet for its next policy-setting meeting on March 15-16.

This post will be updated with the Bureau of Labor Statistics Consumer Price Index report on Thursday morning at 8:30 a.m. ET. Check back for updates.

Emily McCormick is a reporter for Yahoo Finance. Follow her on Twitter

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