New data from the Bureau of Labor Statistics on Wednesday showed that a key measure of inflation fell for the first time since July.
On a core basis, which excludes the more volatile costs of food and gas, December’s consumer price index (CPI) rose 0.2% from the previous month, a slowdown from the month’s gain 0.3% in November. On an annual basis, prices increased by 3.2%.
Before the December release, the core CPI was stuck at an annual gain of 3.3% over the past four months. It was the first time since July that the core CPI saw a slowdown in year-on-year price growth.
The printout contains the latest economic data that the Federal Reserve will consider before its next interest rate decision later this month.
Consumer prices rose as predicted in December. The CPI rose 2.9% in December from the previous year, up from November’s annual price increase of 2.7%. The annual increase was in line with economists’ expectations.
The index rose 0.4% last month, higher than November’s 0.3% gain and also on par with economists’ estimates.
Seasonal factors such as higher fuel costs and persistent food inflation kept the numbers high.
Core inflation has remained stubbornly high due to higher costs for shelter and services such as insurance and medical care. Used car prices also rose 1.2% month over month in December, following a 2% monthly increase in November.
Although inflation is slowing, it remains above the Federal Reserve’s 2% annualized target.
The election of Donald Trump as the country’s next president has further complicated the prospects, with some economists arguing that the US could face a new uptick in inflation if Trump delivers on his key campaign promises. The new president will be sworn in next week.
Trump’s proposed policies, such as high tariffs on imported goods, tax cuts for businesses and curbs on immigration, are seen as inflationary. And that policy could further complicate the central bank’s stance on interest rates.
Stock futures rose immediately after the report, with the 10-year Treasury yield (^TNX) rising 3 basis points to trade above 4.7%.
Notable points from the inflation figures include the shelter index, which rose 4.6% on an unadjusted annual basis, slightly lower than the 4.7% increase in November and the smallest increase in 12 months since January 2022. The index rose by 0 .3% compared to the previous month, consistent with November.
Economists say persistent inflation is largely responsible for higher core inflation rates in recent months.
The rent and owners’ equivalent rent (OER) index rose 0.3% each from November to December, a slight acceleration from the previous month’s 0.2% increase for both categories. Owner’s equivalent rent is the hypothetical rent a homeowner would pay for the same property.
The index for nights spent away from home fell 1% in December, after rising 3.2% in November.
Meanwhile, the energy index rose 2.6% month-on-month after rising just 0.2% in November. On an annual basis, the energy index fell by 0.5%, after a decline of 3.2% the month before.
Within the energy sector, gas prices soared, rising 4.4% in December after a modest 0.6% increase the previous month.
The food index rose 2.5% in December last year, while food prices rose 0.3% monthly – proving to be a tricky category for inflation. The index for food at home and food away from home each rose by 0.3% in November.
Egg prices continued to stand out, rising a further 3.2% month-on-month, following an 8.2% increase in November.
Other indexes with notable increases over the past year include motor vehicle insurance (+11.3%), medical (+2.8%), education (+4%) and recreation (+1.1%).
Alexandra Canal is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
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