In December, headline inflation in the United States accelerated, reaching 3.4%, while the annual rate of the underlying measure showed a slight deceleration.
The consumer price index (CPI) for the world’s largest economy, adjusted for seasonal variations, rose to 3.4% year-on-year, up from 3.1% in November, as reported by the Bureau of Labor Statistics on Thursday.
On a monthly basis, the pace increased by 0.3%, driven by rising shelter and energy costs, exceeding economists’ expectations of 3.2% and 0.2%, respectively.
Conversely, the annual rate of the “core” measure, which excludes volatile items like food and energy, experienced a slight dip to 3.9%, down from 4.0% the previous month. The core CPI remained unchanged on a monthly basis at 0.3%, matching November’s figure.
Considered a more accurate gauge of persistent price trends, the core numbers were projected at 3.8% and 0.3%.
Analysts at Evercore ISI noted in a client note that while headline CPI was “modestly higher than expected,” the overall trend indicates a continued cooling of inflation, supported by softening leading indicators.
Federal Reserve officials will closely monitor this data, which may influence their approach to potential interest rate cuts later in 2024.
New York Fed President John Williams, in a Wednesday speech, suggested that it is premature to call for rate cuts as inflation remains well above the central bank’s 2% target.
This aligns with recent comments from other rate-setters, who are cautious about market enthusiasm for early reductions, a sentiment that fueled a stock market rally in the final weeks of 2023, albeit with some recent moderation.
