new Data A report released by the Bureau of Labor Statistics on Wednesday showed that the main measure of inflation fell for the first time since July.
On a “core” basis, which excludes the more volatile costs of food and gas, the CPI for December rose 0.2% from the previous month, a slowdown from the 0.3% monthly gain in November. On an annual basis, prices increased by 3.2%.
Prior to the December edition, the core CPI had been stuck at a 3.3% annualized rise over the past four months. This was the first time since July that the year-on-year core CPI saw a slowdown in price growth.
This publication is the latest economic data the Fed will consider before its next interest rate decision later this month. Stocks rose in the wake of the report, with the 10-year Treasury yield (^TNX) falling 12 basis points to trade below 4.7%.
Read more: What a Fed rate cut means for bank accounts, CDs, loans and credit cards
“Markets reacted positively this morning for good reason: The Fed is OK with seeing headline CPI rise temporarily if that increase does not spill over to core CPI, which is what happened in December,” said chief economist Raymond James Eugenio. . Aleman wrote in a note Wednesday.
Core consumer prices rose as expected last month. The Consumer Price Index rose 2.9% from a year earlier in December, a slight increase from November’s annual price increase of 2.7%. The annual increase matched economists’ expectations.
The index rose 0.4% from the previous month, ahead of the 0.3% increase seen in November and also on par with economists’ estimates.
Seasonal factors such as rising fuel costs and continued flatness in food inflation kept headline numbers higher.
US Federal Reserve Chairman Jerome Powell gestures while speaking at a press conference after the Monetary Policy Committee meeting in Washington, D.C., on December 18, 2024. (ANDREW CABALLERO-REYNOLDS / AFP via Getty Images) ·Andrew Caballero-Reynolds via Getty Images
Core inflation has remained stubbornly high due to rising costs of shelter and services such as insurance and medical care. Used car prices also saw another strong rise for the third month in a row, rising 1.2% in December after a 2% monthly increase in November.
Although inflation slowed, it remained above the Fed’s target of 2% on an annual basis.
“Inflation has not been consistent,” Claudia Saham, chief economist at New Century Advisors and a former Fed economist, told Yahoo Finance’s Morning Briefs show. “It’s been quite mixed, but it’s good to see some progress in the right direction. And I think that’s the biggest part of this. We’ve been in a wait-and-see mode on the inflation front. That’s a critical lot where the Fed lines up.”
“It’s a bit of a relief to get some not-so-bad news this morning,” she continued. “But that’s really not a game-changer. It’s much more so than what we saw with the mixed monthly volatility.”
The election of Donald Trump as the country’s next president has further complicated expectations. With the controversy of some economists The United States could face another surge in inflation if Trump follows through on his key campaign promises. The president-elect will be sworn in next week.
The policies Trump proposes, such as high tariffs on imported goods, corporate tax cuts, and restrictions on immigration, are seen as inflationary. These policies could further complicate the central bank’s path forward regarding interest rates.
Notable callouts from the inflation publication include the shelter index, which rose 4.6% on an unadjusted annual basis, slightly lower than November’s 4.7% rise and the smallest 12-month increase since January 2022. The index rose 0.3% from the previous month, matching November .
According to economists, housing inflation has been largely blamed for the rise in core inflation readings over the past few months.
The rental and rent-equivalent index for owners rose 0.3% from November to December, a slight acceleration from the previous month’s increase of 0.2% for both categories. The owner-equivalent rent is the hypothetical rent a homeowner would pay for the same property.
The housing away from home index 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 3.2% decline in the previous month.
In the energy sector, gas prices rose 4.4% in December after a modest rise of 0.6% in the previous month.
Gas prices rose 4.4% in December after a modest 0.6% rise the previous month. (Courtesy Reuters/Kevin LaMarque) ·Reuters/Reuters
The food index rose 2.5% in December compared to last year, with food prices rising 0.3% month-on-month – proving a stable category relative to inflation. The dining at home and dining out indicators rose by 0.3% in December.
Read more: Daily prices continue to rise, even with flat overall inflation
Notably, grocery prices rose on an annual basis to the highest level since October 2023. Egg prices continued to lead, rising another 3.2% on a monthly basis after rising by 8.2% in November. Egg prices rose by 37% over the past year.
Other indicators that saw notable increases over the past year include auto insurance (+11.3%), medical care (+2.8%), education (+4%), and entertainment (+1.1%).
Alexandra Canal He is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, linkedin, And email it to alexandra.canal@yahoofinance.com.
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