RACHEL MARTIN, HOST:
We got our first inflation report of the new year this morning, and - sorry to report - it is not pretty. Consumer prices in January were up 7.5% from a year ago. That's a sharper increase than the month before and even higher inflation than forecasters were predicting. The Federal Reserve is expected to start hiking interest rates as early as next month, all in an effort to rein in rising prices. NPR's chief economics correspondent Scott Horsley is with us now. Hey, Scott.
SCOTT HORSLEY, BYLINE: Good morning, Rachel.
MARTIN: Scott, why is inflation still so high?
HORSLEY: Well, food prices were higher last month, Rachel. Rent was up. Gasoline was actually a little less expensive in January. But electricity prices jumped sharply. So we've now had two months in a row with annual inflation above 7%. That's the highest since early 1982. And this means anybody who's under 40 is witnessing the highest inflation in his or her lifetime. One thing we're seeing is that a lot of big companies that used to be reluctant to raise prices for fear that they would lose customers are now finding they can charge more and not lose business. Just this week, the burrito chain Chipotle said it met no resistance to a 4% price hike in December. The company's sales and profits both outpaced analyst expectations.
MARTIN: So the Labor Department also made some changes today in exactly how it measures inflation, right? What can you tell us about that?
HORSLEY: Yeah, every couple of years, the Labor Department adjusts the basket of goods and services that go into the consumer price index by looking at people's actual spending patterns and trying to mirror those. This year, that routine adjustment includes people spending in 2020, when the pandemic first hit, and obviously, those early months of the pandemic changed what people spend money on. So the new basket includes more groceries but fewer restaurant meals, more household goods but fewer work clothes. In January, that adjustment to the basket probably pushed the inflation reading up just a little bit. The net effect over the longer term is harder to know, but it's something to keep an eye on.
MARTIN: Inflation has been a problem for President Biden, if we talk about the politics of all this. It's been a drag on his approval rating. How is the White House talking about this, messaging around this?
HORSLEY: Yeah, the White House acknowledges the toll that inflation is taking on family budgets, and it's trying to highlight the steps that the administration's taken to untangle supply chains and increase competition. Ultimately, though, fighting inflation is the Federal Reserve's job, and White House spokeswoman Jen Psaki is looking to the central bank to start making its move with interest rates pretty soon.
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JEN PSAKI: The Federal Reserve has purview over the independent approaches that they so choose to. And we certainly - as the president has said, he welcomes and supports their efforts to take steps.
HORSLEY: The Fed has telegraphed pretty clearly that it plans to start raising rates as early as next month, and forecasters think the central bank could move pretty aggressively. Of course, rates have been close to zero throughout the pandemic.
MARTIN: Yeah, so speaking of the Fed, there could soon be some new faces around the very table where interest rates are set. Who are they?
HORSLEY: That's right. President Biden has nominated three new members to serve on the Fed's governing board along with Jerome Powell, who's been renominated, and Lael Brainard, who's been promoted. The Senate Banking Committee is expected to vote on those nominations next week, and then it'd be up to the full Senate to confirm. In addition, the Boston Federal Reserve Bank just announced Susan Collins is joining the bank as president. She's an economist. And she'll be the first African American woman to head one of the 12 regional Federal Reserve banks.
MARTIN: Senior economics correspondent Scott Horsley. We appreciate you, Scott. Thanks.
HORSLEY: Good to be with you. Transcript provided by NPR, Copyright NPR.
