U.S. inflation in January was lifted by two main sources—rising rents and medical costs. The fact is a sign of pressures that could allow the Federal Reserve to raise interest rates this year gradually.
The Labor Department said Consumer Price Index, excluding the volatile food and energy components, increased 0.3 percent last month.
The core CPI rose 2.1 percent in December. The Fed has a 2 percent inflation target and monitors a price measure that is running well below the core CPI.
"It is a policymaker's dream come true, they wanted more inflation and they got it," said Chris Rupkey, chief economist at MUFG Union Bank in New York.
Inflation is being watched as a crucial clue on whether to raise interest rates. In December, the U.S. central bank lifted borrowing costs for the first time in about a decade.
However, the recent plummet of stock market sell-off and slowing global economic growth tightened financial market conditions. The global economy also decreases the probabilities of rate hikes in March.
Although Signs of potential inflation rate are likely to be welcomed by Fed officials, low inflation expectations by households doubts if there are significant gains for domestic economy.
The year-over-year inflation rate is rising while the weakening of oil price in 2015 offset the calculation.
The mortgage industry is one of the winners on higher interest rates. Fannie Mae, the government-controlled company, said its net income in the end of 2015 approximately doubled on higher interest rates.
It also said on Friday that it expects to pay the U.S. Department of Treasury $2.9 billion in dividends next month.