Inflation pressures appear to be building in the U.S. economy, a prospect that is heightening anxiety about potentially higher borrowing rates that could slow economic growth.
The latest source of concern was a report today that showed a key measure of inflation rising in January by the sharpest rate in a year. The increase was led by higher prices for clothing, housing and auto insurance.
Some economists cautioned, though, that some of the price increases are tied to temporary factors and might not signify sustained inflation.
At the same time, the government reported that Americans cut back on their retail spending in January, leading some analysts to downgrade their forecasts for economic growth in the first quarter.
For now, prices aren’t rising fast enough to cause pain for many consumers. Even modestly higher inflation, though, could lead the Federal Reserve to more quickly raise short-term interest rates. That could lead to higher borrowing costs for individuals and businesses.
