The cost of energy items continued to fall in January, which caused a decline in import prices in the United States for a seventh consecutive month. This resulted in the smallest annual increase in imported inflation in the previous two years.

This week’s data showed a rise in monthly consumer and producer prices in January, pointing to a delayed disinflationary process, the Labor Department report on Friday did nothing to assuage financial market concerns that the Federal Reserve would continue its interest rate hike campaign into the summer.

After dropping by 0.1% in December, import prices dropped by 0.2% last month. Economic experts had anticipated a decrease in import prices that did not include taxes.

Import prices rose 0.8% over the previous twelve months to January. With an increase of 3.0% in December, that was the smallest increase year over year since December 2020.

Prices for imported fuel fell by 4.9% after falling by 4.4% in December. Natural gas prices fell 11.2%, and petroleum prices fell 4.5%. Food imports increased in price by 1.3%.

Import prices increased by 0.2% when gasoline and food were excluded. In December, these so-called core import costs increased by 0.4%. Core import costs have now risen for two consecutive months, most likely as a result of the recent depreciation of the dollar versus the currencies of the main trading partners of the United States.

Since last March, the Fed has increased its policy rate by 450 basis points, moving it from near zero to a range of 4.50%–4.75%, with most of the hikes occurring between May and December. The financial markets anticipate a third rate increase in June, although two additional rate hikes of 25 basis points are expected for March and May.

Statistics from this month, which showed strong employment growth and increases in retail sales, suggested that the economy was strong at the start of the year. A rate increase in June has been predicted by several economists, including those at Bank of America (NYSE:BAC) Securities, as a result of this.

“March and May hikes appear very likely, and the Fed might have to hike further if inflation, job growth, and consumer demand refuse to soften,” Bank of America Securities said in a note. “We are adding a 25 basis point hike in June to our forecast.”

In January, the cost of imported capital goods increased, while the price of automobiles climbed by 0.6%. Prices for consumer goods, excluding motor vehicles, increased by 0.2%.

The price of Chinese imports decreased by 0.4%, the most since November 2016. This was due to a 2.3% decrease in the cost of manufacturing communications equipment. While the cost of items from Mexico increased 0.8%, import prices from the European Union increased 1.3%.

According to Conrad DeQuadros, senior economic advisor at Brean Capital in New York, “these figures do not encourage for those looking for manufactured goods price increases to subside to pre-pandemic trends on an easing of supply-chain restrictions.”

The Labor Department also noted that after falling for six consecutive months, export prices increased 0.8% in January. Prices for agricultural exports decreased by 0.2% as a 21.6% drop in vegetable prices outweighed increases in soybean and corn prices.

Export prices for non-agricultural commodities rose 0.8%, driven by increases in capital goods, consumer goods, autos, and consumer durables.

After gaining 4.3% in December, export prices increased 2.3% year over year in January, the weakest increase since December 2020.