Inflation made an unwelcome rebound in January, according to the Fed’s favorite measure of inflation.

Consumer prices rose 0.3% in January from December, an acceleration from the 0.1% gain the previous month, according to the Personal Consumption Expenditures inflation measure, the Bureau of Economic Analysis said Thursday. That made for a 2.4% increase over the past 12 months, down from a 2.6% yearly gain in December.

Food prices were a major reason for the surge in inflation, rising 0.5% over the month, the biggest increase since October 2022.

The report confirmed the trend shown by the Consumer Price Index inflation report earlier this month: January was a setback in the battle against inflation. The resurgence in the PCE price measure after months of declining inflation was especially meaningful because the PCE report is closely watched by officials at the Federal Reserve who set the nation’s monetary policy. The inflation measure was in line with the expectations of forecasters, according to a survey of economists by Dow Jones Newswires and the Wall Street Journal.

Fed officials have held the central bank’s benchmark interest rate at its highest since 2001, pushing up borrowing costs on all kinds of loans—including mortgages and credit cards—to rebalance supply and demand and subdue inflation. Hot inflation reports like the one on Thursday push back the date when Fed officials will feel confident enough that inflation is under control and cut the fed funds rate, giving some relief to borrowers. 

Just after the release, financial markets were pricing in a 49.4% chance the Fed’s first rate cut will come in June, down from 51.6% before the new data, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data.

Prices for everything except food and energy (so-called core inflation) rose 0.4% in January for a 2.8% annual increase, a sharp rise from the 0.1% monthly uptick in December. While core inflation leaves out some of the most important items for household budgets, officials pay close attention to it because it is thought to better show the overall direction of inflation.