CPI inflation December 2024:

The prices that consumers pay for a variety of goods and services rose again in December, but they closed 2024 with slightly better news on inflation, especially in housing.

U consumer price index rose a seasonally adjusted 0.4% in the month, putting the 12-month inflation rate at 2.9%, the Bureau of Labor Statistics said Wednesday. Economists polled by Dow Jones were looking for respective readings of 0.3% and 2.9%.

However, excluding food and energy, the annual rate of the core CPI was 3.2%, a notch from the previous month and slightly better than the forecast of 3.3%. The core measure increased 0.2% on a monthly basis, also 0.1 percentage points less than expected.

Most of the higher movement in the CPI came from a gain of 2.6% in energy prices for the month, pushed higher by a surge of 4.4% in gasoline. That was responsible for about 40% of the gain of the index, according to the BLS. Food prices have also increased, by 0.3% for the month.

On an annual basis, food increased by 2.5% in 2024 while energy decreased by 0.5%.

House prices, which make up about a third of the CPI weighting, rose 0.3% but were up 4.6% from a year ago, the smallest one-year gain since January 2022.

Stock market futures rose after the release as Treasury yields fell.

Although the numbers compare favorably to forecasts, they still show that the Federal Reserve has work to do to reach its 2% inflation target. General inflation has decreased from its rate of 3.3% in 2023, while the core was 3.9% a year ago.

“Today’s CPI may help the Fed feel a little more dovish. It won’t change expectations for a break later this month, but it should curb some of the talk about the Fed potentially raising rates ” said Ellen Zentner, the Fed’s chief economic strategist. Morgan Stanley’s wealth management. “And judging by the initial market response, investors seem to be feeling a sense of relief after a few months of tighter inflation readings.”

Inflation readings this week – the BLS released its product price index on Tuesday – are expected to keep the Fed on hold when it convenes its policy meeting later this month.

While the market cheered the CPI release, the news was less positive for workers: inflation-adjusted hourly earnings for the month fell by 0.2%, putting the annual gain at just 1%. u BLS said in a separate release.

Details in the inflation report were otherwise mixed.

Used vehicle and truck prices jumped 1.2% while new vehicle prices also moved higher by 0.5%. Transportation services rose 0.5% and rose 7.3% year-on-year, while egg prices jumped 3.2%, bringing the annual gain to 36.8% . Car insurance increased 0.4% and was 11.3% annually.

“The inflation rate is currently facing a ‘last mile’ problem, where progress in reducing price pressures is slowing down,” said Sung Won Sohn, a professor at Loyola Marymount University and chief economist at SS Economics. “The key drivers of inflation, including gas, food, vehicles and shelter, remain persistent challenges. However, there are hopeful signs that long-term inflationary pressures may continue to ease, helped by moderation of trends in critical areas such as housing and labor.”

The report comes with markets uncertain about the state of inflation and the Fed’s potential response. Tariffs and mass deportations that the president elect Donald Trump he promised that they have increased concerns about inflation.

Employment growth in December was much stronger than economists had expected, with the gain of 256,000 raising even more concerns that the Fed could remain on hold for an extended period and even contemplate raising interest rates if inflation causes more stickers than the expert.

December’s CPI report, coupled with Tuesday’s relatively soft reading on wholesale prices, shows that while inflation is not cooling sharply, it is also showing no signs of accelerating.

A separate report on Wednesday from the New York Fed showed that manufacturing activity softened, but prices paid and received increased substantially.

Futures prices continue to imply a near-certainty that the Fed will remain at its January 28-29 meeting, but it has headed more favorably toward two rate cuts for the year, assuming increases of a quarter percentage point , according to figures from the CME Group. Markets expect the next cut to likely happen in May or June.

The Fed uses the Commerce Department’s personal consumption price index as its primary forecast measure for inflation. However, the CPI and PPI measures figure into this calculation.

Both readings likely mean that core PCE will rise just 0.2% in December, keeping the annual rate at 2.8%, according to Samuel Tombs, chief US economist at Pantheon Macroeconomics.