The core consumer price index increased 0.2% after rising 0.3% for four straight months. — Reuters
NEW YORK: US consumer prices rose in December by less than forecast after months of faster underlying inflation persuaded the Federal Reserve (Fed) to signal a pause in interest-rate cuts.
The so-called core consumer price index (CPI) – which excludes food and energy costs – increased 0.2% after rising 0.3% for four straight months, Bureau of Labour Statistics figures showed.
Cheaper hotel stays, a smaller advance in medical care services and relatively tame rent increases helped restrain the December figure. While the easing in the CPI is welcome, Fed officials would need to see a series of subdued readings after months of elevated prints to reassure them that inflation progress has resumed.
Lingering price pressures have contributed to a deep selloff in global bond markets and fuelled concerns that the Fed eased policy too quickly at the end of last year.
Combined with last week’s strong jobs report, policymakers are widely expected to leave rates unchanged at their meeting later this month, and traders generally don’t see another cut until later this year.
“There’s still more inflation-fighting work for the Fed to do, which is why it has shifted plans to more slowly reduce the still-restrictive federal funds rate,” BMO Capital Markets senior economist Sal Guatieri said in a note. “It will stand pat later this month, and may not resume cutting rates until it gets some clarity on the inflation pass-through of the tariffs that could begin rolling out next week.”
Treasury yields slid and the S&P 500 index futures rose while the dollar declined after the CPI data. Economists see the core gauge as a better indicator of the underlying inflation trend than the overall CPI that includes often-volatile food and energy costs.
The headline measure rose 0.4% from the prior month, with over 40% of the advance due to energy.
This is the last inflation report of President Joe Biden’s tenure, an administration dogged by high prices coming out of the pandemic that surged a cumulative 20% while he was in office. — Bloomberg
