The latest inflation data released on Wednesday showed the Consumer Price Index (CPI) rose as expected in December, with core inflation showing some easing. Attention is now on the Federal Reserve’s next steps.
Data from the Bureau of Labor Statistics showed that the CPI rose 2.9% in December from a year earlier, up from a 2.7% annual increase in November. The increase was in line with economists’ expectations.
The index rose 0.4% from the previous month, higher than the 0.3% increase seen in November, but also in line with economic expectations.
Seasonal factors such as higher fuel costs and persistent food inflation weighed on the headline figure.
The “core” CPI, which excludes the more volatile costs of food and gas, rose 0.2% from the previous month in December, down from a 0.3% increase in November, and 3.2% from a year ago.
Prior to the December data, annual core inflation had remained at 3.3% for four straight months. This was the first time since July that annual core inflation had recorded a decline in the rate of price increases.
Core inflation remained high due to rising housing costs and services such as insurance and health care. Used car prices also rose 1.2% in December, after rising 2% the previous month.
While inflation showed signs of easing, it still exceeded the Federal Reserve’s 2% annual target.
The election of Donald Trump as president further added to the uncertainty, with some economists warning that the US could face a resurgence of inflation if Trump implements key campaign promises. Trump will be sworn in next week.
Trump’s proposed policies, such as higher tariffs on imported goods, corporate tax cuts and immigration restrictions, are seen as potentially boosting inflation. This could further complicate the Federal Reserve’s move to set interest rates.
Meanwhile, stock futures rose immediately after the report, with the 10-year Treasury yield rising 3 basis points to trade above 4.7%.
