According to ActionForex, analysts at TD Bank Financial Group note that consumer prices rose 0.3% month-on-month in January as prices at the pump were once again a key upward force in CPI inflation.

"Consumer prices rose 0.3% month-on-month in January, right on expectations. Total CPI was up 1.4% year-on-year in January, unchanged from December.""

Prices at the pump were once again a key upward force in CPI inflation. Gasoline prices rose 7.4% month/month in January (seasonally adjusted), but remain 8.6% below year-ago levels. In contrast, food prices had heated up through the pandemic, but rose a much milder 0.1% m/m in January. Overall, food prices are up 3.8% versus a year ago, one of the hottest categories in the consumer basket."

"Core prices ex-food and energy were flat for the second straight month in January. As a result, core inflation has lost steam on a year-on-year basis to 1.4%, matching the headline measure."

"The weak reading on core inflation was due to another flat reading for core services prices. Core services inflation continues to lose steam on a year/year basis, running at only 1.3% in January, down from 1.6% in December. Core goods prices rose 0.1% m/m, and are up 1.7% versus a year ago, unchanged from December."

"There has been a lively debate in economic circles recently about whether the significant fiscal package proposed by the Biden Administration (see report on Biden’s American Rescue Plan) will trigger an undesirable acceleration in inflation. With inflation still well below the Fed’s 2% target, there is room for inflation to heat up before it reaches a concerning pace."