U.S. consumer prices rose more than expected in January amid a surge in the cost of shelter, but the pick-up in inflation did not change expectations that the Federal Reserve will start cutting interest rates in the first half of this year, Reuters reported. The largest increase in prices in four months reported by the Labor Department on Tuesday came against the backdrop of labor market strength and economic resilience. Some economists also blamed difficulties adjusting the data for seasonal fluctuations for the stronger-than-expected inflation readings. "Today's data is not what markets or the Fed would have liked to see, but it's important not to over react and jump to the assumption that an inflationary resurgence is developing," said Seema Shah, chief global strategist at Principal Asset Management. "A March cut is completely off the agenda, but May could still be in play if economic activity plays ball and finally starts to show the impact from prior Fed tightening." The consumer price index (CPI) increased 0.3% last month after gaining 0.2% in December, the Labor Department's Bureau of Labor Statistics said. Shelter, which includes rents, accounted for more than two-thirds of the rise in the CPI. New weights, published last week, which saw the housing share rising and that of new and used cars lowered, were used to calculate the January consumer price data.
