Prices paid by consumers for a variety of goods and services rose again in December, but 2024 ended with slightly better news on inflation, especially in housing.
The consumer price index The Bureau of Labor Statistics reported Wednesday that it rose a seasonally adjusted 0.4% for the month, bringing the 12-month inflation rate to 2.9%. Economists polled by Dow Jones expected 0.3% and 2.9%, respectively.
However, excluding food and energy, the annual core CPI rate was 3.2%, down from the previous month and slightly better than the forecast of 3.3%. The core measure rose 0.2% on a monthly basis, also 0.1 percentage point less than expected.
Much of the CPI increase was driven by a 2.6% monthly increase in energy prices, boosted by a 4.4% increase in gasoline prices. This was responsible for about 40% of the index's gain, according to the BLS. Food prices also increased, by 0.3% on a monthly basis.
On a year-over-year basis in 2024, food grew by 2.5% and energy fell by 0.5%.
Shelter prices, which make up about a third of the CPI weight, rose 0.3% but were up 4.6% from a year ago, the smallest annual increase since January 2022.
Following this release, stock futures rose while Treasury yields fell.
While these numbers compared favorably with forecasts, they still show that the Federal Reserve still has work to do to reach its 2% inflation target. Headline inflation declined from 3.3% in 2023, while core inflation was 3.9% a year ago.
This week's inflation readings – the BLS released its agricultural price index on Tuesday – are expected to keep the Fed on hold during its policy meeting later this month.
While the market welcomed the CPI release, the news for workers was less positive: inflation-adjusted monthly earnings fell 0.1%, representing a year-on-year increase of just 1%. The BLS said in a separate release.
Otherwise, the details of the inflation report were mixed.
Prices for used cars and trucks increased by 1.2%, while new vehicle prices also increased by 0.5%. Transport services increased by 0.5% and increased by 7.3% year-on-year, while egg prices increased by 3.2%, reaching an annual increase of 36.8%. Motor insurance increased by 0.4% and increased by 11.3% year-on-year.
The report shows market concern about the state of inflation and the Fed's potential response.
Job growth in December was much stronger than economists expected, with: profit 256 thousand raising concerns that the Fed could remain unchanged for an extended period and even consider raising interest rates if inflation turns out to be more sticky than expected.
The December CPI report, combined with Tuesday's relatively mild wholesale price reading, shows that while inflation is not falling dramatically, it is also showing no signs of accelerating again.
A separate report from the New York Fed on Wednesday showed manufacturing activity weakened, but prices paid and received rose significantly.
Futures pricing continued to suggest near certainty that the Fed would remain unchanged at its Jan. 28-29 meeting, but would be more favorable to two rate cuts in a year, assuming a quarter increase, according to CME Group data. percentage point.
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