PhotoThe cost of living rose more than expected last month as consumers had to pay more for food and gasoline.

The Bureau of Labor Statistics reports the Consumer Price Index (CPI) rose 0.5 percent despite most economists predicting a smaller 0.3 percent rise. With the volatile food and energy sectors removed, prices rose a more modest 0.3 percent, which was still a little higher than expected.

The government numbers show prices crept higher through a broad section of categories, including housing, gasoline, apparel, medical care, and food.

Consumers with investments in the stock market are taking another beating today, since the markets equate rising inflation with higher interest rates. Robert Frick, corporate economist at Navy Federal Credit Union, says rising prices make the Federal Reserve more likely to increase the number of interest rate hikes this year.

"If this does mean higher rates, consumers will need to take extra care to monitor the effects on credit cards and home equity line of credit rates, both of which are sensitive to Fed hikes," Frick told ConsumerAffairs. "And those shopping for a house will need to factor in potentially higher mortgages rates, which are influenced by 10-year Treasury yields."

Monitor rates on credit cards

At the same time, even rising interest rates are not likely to be very high. Until recently, the Fed kept its key interest rate at near zero percent. Even after a few price hikes, rates are still historically low.

"The greater danger may be to workers, who are still waiting for a strong rise in wages," Frick said. "If fears of higher inflation -- and inflation is still just rising at a moderate rate -- cause the Fed to raise rates more to cool down the economy, a big wage bump may not materialize.”

The 0.5 percent rise in January's CPI follows a 0.3 percent increase in December and 0.2 percent increase in November. Averaged out for a 12-month period, inflation is running at 2.1 percent, just slightly above the Fed's target of 2.0 percent.

Despite the overall increase, the price of a few things actually went down last month. Natural gas prices were down the most, falling 2.6 percent.

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