The Labor Department said on Wednesday its Consumer Price Index jumped 0.6 per cent last month after gaining 0.3 per cent in December. January's increase in the CPI was the largest since February 2013. In the 12 months through January, the CPI increased 2.5 per cent, the biggest year-on-year gain since March 2012.
Inflation is trending higher as prices for energy goods and other commodities rebound as global demand picks up.
The so-called core CPI, which strips out food and energy costs, rose 0.3 per cent last month after increasing 0.2 per cent in December. That lifted the year-on-year core CPI increase to 2.3 per cent in January from December's 2.2 per cent increase.
The Fed has a two per cent inflation target and tracks an inflation measure which is currently at 1.7 per cent. Gradually firming inflation and a tightening labour market could allow the Fed to raise interest rates at least twice this year.
Fed Chair Janet Yellen told lawmakers on Tuesday that "waiting too long to remove accommodation would be unwise."
The US central bank has forecast three rate increases this year. The Fed hiked its overnight interest rate last December by 25 basis points to a range of 0.50 per cent to 0.75 per cent.
Last month, gasoline prices surged 7.8 per cent, accounting for nearly half of the rise in the CPI. That followed a 2.4 per cent increase in December. Food prices edged up 0.1 per cent after being unchanged for six straight months. The cost of food consumed at home was unchanged after dropping for eight consecutive months.
Within the core CPI basket, rents increased 0.3 per cent last month after a similar gain in December. Owners' equivalent rent of primary residence gained 0.2 per cent in January after increasing 0.3 per cent the prior month.
The cost of medical care rose 0.2 per cent, with the prices for hospital services and prescription medicine both increasing 0.3 per cent. Motor vehicle prices shot up 0.9 per cent, the largest rise since November 2009.