The Federal Reserve's preferred inflation gauge ticked higher in January, a sign that price pressures remain entrenched in the U.S. economy and could lead the Fed to keep raising interest rates well into this year.

Friday's report from the Commerce Department showed that consumer prices rose 0.6% from December to January, up sharply from a 0.2% increase from November to December. On a year-over-year basis, prices rose 5.4%, up from a 5.3% annual increase in December.

The personal consumption expenditures (PCE) report also showed that consumer spending rose 1.8% last month from December after falling the previous month.

All told, Friday's data provided the latest sign that the economy remains gripped by high inflation despite the Fed's strenuous efforts to tame it.

"The personal income, spending and inflation data for January all showed an economy running too hot for the Fed," Nancy Vanden Houten, lead economist at Oxford Economics, said in a research note. 

Friday's report comes after a separate inflation measure last week — the consumer price index — which showed that prices stayed higher than economists had hoped in January. Measured year over year, consumer prices climbed 6.4% in January. While that was well below a recent peak of 9.1% in June, it's still far above the Fed's 2% inflation target.

Higher interest rates?

Stocks fell on the report, with the S&P 500 dropping 1.6% in morning trading and the Dow Jones losing 1.5%.

"This morning's inflation data again came in higher than expected and it just reinforces the view that inflation is more persistent, and even though we now have much higher interest rates, it is much too soon for the Fed to say 'Mission Accomplished,'" Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, said in a note.

Many analysts say they now expect the Fed to raise interest rates higher, and keep them elevated longer, than initial predictions.

Since March of last year, the Fed has attacked inflation by raising its key interest rate eight times, creating much higher borrowing costs for individuals and businesses. Despite the hikes, the job market remains surprisingly robust — a worrisome sign for the Fed, which believes that strong demand for workers fuels wage growth and overall inflation. 

Consumer trends

The Fed is thought to monitor the inflation gauge that was issued Friday — the personal consumption expenditures price index — even more closely than it does the government's better-known CPI.

Typically, the PCE index shows a lower inflation level than CPI. In part, that's because rents, which have soared, carry twice the weight in the CPI that they do in the PCE.

The PCE price index also seeks to account for changes in how people shop when inflation jumps. As a result, it can capture emerging trends — when, for example, consumers shift away from pricey national brands in favor of less expensive store brands.

The consumer price index showed a worrisome rise from December to January: It jumped 0.5% — five times the November-to-December increase.

Likewise, the government's measure of wholesale inflation, which shows price increases before they hit consumers, accelerated 0.7% from December to January after having dropped 0.2% from November to December.