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U.S. inflation worsened last month as the cost of groceries and gasoline head higher

An empty shelf of free range eggs is seen at a Safeway, Monday, Jan. 27, 2025, in Seattle. Associated Press

WASHINGTON — U.S. inflation accelerated last month as the cost of groceries, gas, and used cars rose, a disappointment for families and businesses struggling with higher costs and likely underscoring the Federal Reserve's resolve to delay any further interest rate cuts.

The consumer price index increased 3% in January from a year ago, Wednesday’s report from the Labor Department showed, up from 2.9% the previous month. It has increased from a 3 1/2 year low of 2.4% in September.

The figures show that inflation has remained stubbornly above the Fed's 2% target for roughly the past six months, after it fell steadily for about a year and a half. Elevated prices created a major political problem for former President Joe Biden. President Donald Trump pledged to reduce prices in last year's campaign, though most economists worry that his many proposed tariffs could at least temporarily increase costs.

The unexpected boost in inflation could dampen some of the business enthusiasm that arose after Trump's election on promises to reduce regulation and cut taxes. Dow futures tumbled 400 points and all major markets are likely to sell off at the opening bell. Bond yields rose, a sign traders expect inflation and interest rates to remain high.

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