Hot Inflation Report Rattles Wall Street

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A inflation measure closely watched by the Federal Reserve rose faster than expected in January as consumer prices remain stubbornly high, according to new data released Friday.

The personal consumption expenditures (PCE) index showed that consumer prices rose 0.6% from the previous month — the most since June — and accelerated 5.4% on an annual basis, according to the Bureau of Labor Statistics. Those figures are both higher than the 0.2% monthly increase and 5.3% headline jump recorded in December, a worrisome sign for the Federal Reserve as it tries to crush runaway inflation with the most aggressive series of interest rate hikes since the 1980s. 

Core prices, which strip out the more volatile measurements of food and energy, climbed 0.6% from the previous month and 4.7% year-over-year, also faster than in December.

"Core inflation in January was hotter than expected, all but insuring the Fed will continue on its rate hiking campaign for a lot longer than markets anticipated just a few weeks ago," said Jeffrey Roach, chief economist at LPL Financial.

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