United States: Prices on goods and services are ticked up again in December, but there’s a bit of good news to end the year—particularly in the housing sector. The consumer price index rose by almost like 0.4% for the month, keeping the annual inflation rate steady at almost 2.9%. While it matched expectations, the numbers offer a glimpse of stability as the economy heads into 2025.
But, if some volatile foods and energy are stripped out, the core CPI annual rate, was 3.2% just slightly better than forecast 3.3% and down from the previous month. The core measure was 0.2% higher than in the previous month and was 0.1 pp lower than predicted.
As reported by CNBC, most of the increase in the CPI was driven by energy prices which rose 2.6% for the month due to a 4.4% increase in gasoline. That was for an equivalent of 40% of the index’s rise the BLS says. Food prices also increased by 0.3% on the month basis.
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Annually, food had increased by 2.5% in 2024 while energy just folded down slightly by 0.5%.
Shelter, which accounts for a third of the CPI weights, increased by 0.3% but core inflation, year on year, has been 4.6% not seen since January this year. Core services inflation, which strips out rents, also climbed 4% year on year, which is the weakest increase since February 2024.
Stock market futures rose after the number and treasury yields fell after the release.
Whilst the numbers are a considerable improvement in relation to forecasts, the results still indicate that the Federal Reserve has a long way to go in order to achieve its 2% inflation rate. Headline inflation was at 3.2 percent in 2023 and core was 3.9 percent in a year ago.
Today’s CPI may help the Fed feel a little more dovish today. It won’t alter market forecasts for a stop out this month, but it ought to put a halt to some or the fed possibly raising rates talk.” “And as the market is responding to the latest numbers, investors looked somewhat relieved after several months of higher-than-expected inflation figures.”
The inflation numbers this week – the BLS produce price index was out yesterday – are unlikely to overly excite the Fed when it meets.
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