Inflation's cooldown slows, as prices rose 6.4% in January

What’s the takeaway?

Stubborn inflation: After three months of pronounced cooling, inflation’s downward slope flattened in January. It’s just one month of data, but shows that the path to bringing prices down may not always be a smooth one.

Adding that inflation remains up 14.4% on a two-year basis, GlobalData Managing Director Neil Saunders said the report shows there is a "clear risk" that inflation will continue to dominate in 2023. This is being driven in part by continued spending, even in the face of higher prices.

"There have been some areas of modest improvement since last month, but most shoppers are still firmly in money-saving and budgeting mode," Saunders said. "One of the issues, however, is that despite some changes in behavior overall demand remains fairly strong. While consumers are cutting back at the margins, they are still spending which is not allowing the economy to cool and inflation to wither."

Economists have warned of the risk that inflation could rise again, even after it begins to descend. That’s not the trend being observed here, but the slowdown will get the attention of the Federal Reserve’s top committee as they weigh their next moves on interest rates.

Shelter rising: Inflation is also moving to other categories. For months, food and gas drove the Consumer Price Index increases. Food is coming down, while gas prices only increased 1.5% for the month. But now, it is shelter, which includes rent, that is proving to be a major factor in inflation. This could continue to impact discretionary spending, as people who are paying more for rent will try to save money in other areas.