Consumer prices in the US rose 0.4% in December, with annual inflation at 2.9%, BLS reports
The Bureau of Labor Statistics (BLS) reported that consumer prices in the US rose in December, with the Consumer Price Index (CPI) increasing by 0.4 percent on a seasonally adjusted basis.
According to CNBC, this brought the annual US inflation rate to 2.9 percent, meeting economist expectations as surveyed by Dow Jones.
However, the core CPI, which excludes volatile food and energy prices, rose by 3.2 percent annually, slightly lower than the previous month’s 3.3 percent and less than the anticipated 3.3 percent forecast.
The BLS noted that much of December's CPI increase stemmed from energy prices, which rose by 2.6 percent, including a 4.4 percent surge in gasoline, contributing to 40 percent of the month’s inflation.
Food prices increased by 0.3 percent monthly and 2.5 percent annually. Energy prices declined by 0.5 percent for the year.
Shelter prices, a significant component of the US CPI with a one-third weighting, rose 0.3 percent in December and increased 4.6 percent annually—the smallest annual rise since January 2022.
Services prices, excluding rents, grew by 4 percent year-over-year, the lowest since February 2024.
Ellen Zentner, Morgan Stanley Wealth Management’s chief economic strategist, remarked, “Today’s CPI may help the Fed feel a little more dovish. It won’t change expectations for a pause later this month, but it should curb some of the talk about the Fed potentially raising rates.”
Despite market optimism, workers experienced a decline in real wages. Inflation-adjusted hourly earnings fell by 0.2 percent in December, leaving the year-over-year increase at just 1 percent, according to a separate BLS release.
Other details in the CPI report were mixed. Used car and truck prices rose by 1.2 percent, while new vehicle prices increased by 0.5 percent.
Transportation services jumped 0.5 percent in December and were up 7.3 percent annually. Auto insurance increased by 0.4 percent for the month, with an 11.3 percent annual rise. Egg prices surged 3.2 percent in December, bringing their annual increase to 36.8 percent.
Economist Sung Won Sohn of Loyola Marymount University highlighted persistent US inflation drivers such as gas, food, vehicles, and shelter but noted “signs of hope” in moderating trends within key sectors.
Stock market futures surged, and Treasury yields fell following the US CPI release.
Markets continue to anticipate that the Federal Reserve will maintain its current monetary policy stance at its January 28–29 meeting. Futures data from CME Group indicate a near certainty of no rate changes, with a 50-50 likelihood of two rate cuts later in the year.
US’s CPI report follows the Producer Price Index (PPI) release earlier in the week, which similarly showed a modest deceleration in inflation.
December's job growth in the US exceeded expectations, with 256,000 jobs added, raising concerns about prolonged inflation and its potential impact on future Fed decisions.
The Federal Reserve’s preferred inflation measure, the personal consumption expenditures price index, is expected to show a 0.2 percent increase for December, keeping the annual rate at 2.8 percent, according to Samuel Tombs, chief US economist at Pantheon Macroeconomics.
