CPI Inflation Hurt More In December But With A Silver Lining | Global News Avenue

The cost of living rose more in December than the previous month as rising energy costs hurt household budgets and fueled inflation. However, “core” prices have cooled, providing some hope for lower inflation in the coming months.

The consumer price index, which measures the cost of living, rose 2.9% year-on-year in December, up from 2.7% in November. The U.S. Bureau of Labor Statistics said Wednesday that the index posted its fastest annual gain since July.

According to a survey by economists Dow Jones Newswires and Wall Street Journal, Prices rose 0.4% on the month, slightly above forecasters’ consensus forecast of 0.3%. Energy costs, especially natural gas costs, rose 4.4% this month, accounting for more than 40% of the overall increase.

The core of inflation is calmness

Food and gas prices aside, “core” prices have risen more slowly, rising 0.2% this month (and 3.2% for the year) after rising 0.3% for three consecutive months. The indicator was below the median forecast for another 0.3% growth, for an annual growth rate of 3.3%. Economists and policymakers look to core prices to gauge the trajectory of inflation because food and gas prices can fluctuate for reasons unrelated to long-term inflation trends.

Lower core inflation not only directly helps household budgets, but may revive hopes for lower interest rates on credit cards and other loans later this year. After cutting rates at the past three meetings, the Fed is widely expected to keep rates steady at the January Fed Policy Committee meeting. However, the Fed could cut interest rates later this year if core inflation continues to cool and approaches the central bank’s 2% annual interest rate target.

Tina Adatia, head of fixed income client portfolio management at Goldman Sachs Asset Management, wrote in comments: “Today’s core consumer price index (CPI) data came in lower than expected, following recent hot data, That should help ease concerns that inflation is reaccelerating. “The release may not be enough to make a January rate cut possible, reinforcing the case that the Fed’s rate-cutting cycle is not over yet.” “

As of Wednesday morning, financial markets priced in a 15% chance that the Fed would not cut interest rates before the end of the year, down from 26% in futures trading the day before, according to CME Group’s FedWatch tool, which forecasts rate changes based on federal funds.