Inflation likely cooled on an annual basis for a seventh straight month in January, continuing a deceleration that has come as supply chains have healed and prices have increased more slowly or even declined across an array of goods as varied as used cars and women’s dresses.
But economists expect Consumer Price Index data scheduled for release on Tuesday to show that price increases picked up briskly on a monthly basis in January. That’s likely true across both key measures, the one that includes gas and groceries and a “core” index that strips those products out on account of their month-to-month volatility to get a better sense of the underlying inflation trend.
The combination underlines that while the Federal Reserve has been receiving positive news on inflation — price increases are no longer relentlessly accelerating, the way they did for much of 2021 and the first half of 2022 — it could be a long and bumpy road back to normal.
“There has been an expectation that it will go away quickly and painlessly — and I don’t think that’s at all guaranteed,” Jerome H. Powell, the Fed chair, said at an event last week.
Economists surveyed by Bloomberg forecast that the Consumer Price Index climbed by 6.2 percent in the year through last month. That would be a drop from 6.5 percent in December, and notably slower than a peak of about 9 percent in June 2022.
But on a monthly basis, the index was expected to rise 0.5 percent from December — much faster than the previous 0.1 percent. While much of the increase likely owed to climbing gas prices, the core index is also expected to come in at 0.4 percent, a rapid pace. That would match the increase in the previous month, which was revised up last week from a previously-reported 0.3 percent.
Pricier airfares, car insurance, and a continued rapid increase in rental costs are among the factors that some economists expect will prop up those monthly inflation figures.
Much of the inflation slowdown in recent months has come from a moderation in price increases for goods and commodities. After stripping those out, services inflation — which includes health care, restaurant meals, pedicures and other nonphysical purchases — remains unusually rapid and has shown little sign of slowing down.
Officials at the Fed have been closely watching to see whether those service price increases can decelerate, betting that it will probably be necessary to drive them lower in order to return inflation to the 2 percent they aim for on average and over time. Central bankers define their inflation goal using a related but more delayed inflation measure.
Policymakers are worried that it could be challenging to wrestle inflation back to normal at a moment when the labor market is so strong, in part because companies may charge more as they pay more to compete for a limited pool of workers. Wages are a major cost of doing business for many service providers.
Employers added more than half a million jobs in January, an unexpectedly robust number, and gains in average hourly earnings and other pay trackers remain rapid, though they have begun to slow.
How strong inflation and the overall economy prove in the coming months will influence how high Fed policymakers ultimately lift interest rates and how long they keep them elevated. Central bankers have lifted their main policy rate from near-zero to more than 4.5 percent in less than a year, and have forecast that they will climb slightly above 5 percent.
“The base case for me is that it will take some time, and we’ll have to do more rate increases, and then we’ll have to look around and see whether we’ve done enough,” Mr. Powell said last week.
