U.S. prices accelerated in January amid a surge in the costs of services like housing and finance, but the annual increase in inflation was the smallest in three years, keeping a mid-year interest rate cut from the Federal Reserve on the table. The report from the Commerce Department on Thursday also showed consumer spending slowing last month, restrained by decreases in outlays on goods, including motor vehicles, furniture and other long-lasting household equipment. The inflation and consumer spending readings were in line with economists' expectations. But with the costs of services increasing by the most in 12 months, likely as businesses raised prices at the start of the year, the timing of the first Fed rate cut remains uncertain. Most economists do not expect the price increases to repeat in February. Services, which also include healthcare, restaurants, hotels and motels as well as recreation, are at the heart of the U.S. central bank's fight against inflation. Policymakers have said they are in no rush to start lowering borrowing costs.
