U.S. inflation rose last month as the costs of groceries, gasoline, and rent increased, adding pressure on families and businesses already struggling with higher expenses. This surge may strengthen the Federal Reserve’s stance on delaying interest rate cuts.

According to the Labor Department’s report on Wednesday, the Consumer Price Index (CPI) climbed 3% in January compared to the previous year, up from 2.9% in December. Inflation has remained above the Fed’s 2% target for roughly six months after a steady decline over the past year and a half.

The rising prices have become a political challenge for President Joe Biden, while former President Donald Trump has vowed to lower costs if re-elected, though economists caution that his proposed tariffs could temporarily drive prices higher. Following the inflation report, the stock market reacted negatively, with the Dow dropping 400 points and bond yields rising, signaling expectations of prolonged high inflation and interest rates.

Sarah House, a senior economist at Wells Fargo, noted that inflation remains persistent, delaying any potential Fed rate cuts. While price increases in January are common due to annual corporate adjustments, House emphasized that this isn’t just a one-time spike. Consumer spending, particularly among wealthier individuals, remains strong, reducing incentives for businesses to curb prices.

Excluding food and energy, core inflation increased by 3.3% in January from the previous year, up from 3.2% in December. On a monthly basis, overall prices surged 0.5% from December to January—the biggest jump since August 2023—while core prices rose 0.4%, the most significant increase since March 2024.

Grocery costs alone climbed 0.5% in January, driven by a 15.2% spike in egg prices, the largest monthly increase since 2015. Over the past year, egg prices have surged by 53%, largely due to an avian flu outbreak that forced farmers to cull 40 million birds. As a result, some stores have placed limits on egg purchases, and restaurants have added surcharges to egg-based dishes.

Other rising costs included car insurance (up 2% from December), hotel stays (up 1.4%), and gasoline (up 1.8%).

Trump’s tariffs are also affecting businesses like Abt, a consumer electronics store in Illinois. Phil Hannon, Abt’s vice president of operations, said that his store is preparing for price hikes of 3% to 15% as soon as March due to tariffs on steel and aluminum. To mitigate costs, the company has locked in supplier orders for up to 90 days.

Federal Reserve Chair Jerome Powell, speaking before the House Financial Services Committee on Wednesday, acknowledged inflation progress but noted that “we’re not quite there yet.” As a result, the Fed plans to keep interest rates high for now. Since inflation peaked at 9.1% in June 2022, the Fed raised rates to a two-decade high of 5.3%, restricting borrowing and spending.

On social media, Trump called for lower interest rates, suggesting they should align with his upcoming tariffs. However, the latest inflation spike makes rate cuts less likely in the near future.

A key concern for economists is that prices for goods—excluding food and energy—rose 0.3% in January. Items like cars, furniture, and appliances, which had stabilized as supply-chain issues eased, are now becoming more expensive again, even before the latest round of tariffs takes effect.

Trump’s 25% tariffs on steel and aluminum could raise costs for vehicles, home appliances, and industrial equipment. He also recently proposed “reciprocal tariffs” on countries with high duties on U.S. exports.

Anthony Saglimbene, chief market strategist at Ameriprise, warned that prolonged uncertainty could undermine business confidence, potentially slowing hiring and investment. Powell also acknowledged that higher tariffs could push inflation up, limiting the Fed’s ability to reduce interest rates. However, he emphasized that the impact depends on the scope and duration of the tariffs.

“In some cases, it doesn’t reach the consumer much, and in some cases, it does,” Powell said. “And it really does depend on facts that we haven’t seen yet.”