The latest CPI report today from the Bureau of Labor Statistics (BLS) shows encouraging signs of slowing inflation in the U.S. December’s annual inflation rate came in at 2.9%, the lowest since early 2022. However, the CPI data release today also highlights ongoing challenges for consumers, with rising costs in some essential areas like gas and food.
Key Points from the CPI Data Today
Housing Costs: Shelter prices rose 0.3% in December and 4.6% over the year, marking the smallest annual increase since January 2022.
Energy Prices: Gasoline surged 4.4% in December, contributing to 40% of the month’s overall inflation rise. Energy costs increased 2.6% for the month.
Food and Transportation: Food prices climbed 0.3% in December and 2.5% over the year, while transportation services, including public transit and airline tickets, rose 7.3% annually.
Wages: Inflation-adjusted hourly wages dropped 0.2% in December, leaving just a 1% increase compared to last year.
The CPI news today sparked positive reactions in the stock market, with futures climbing and Treasury yields falling. Many investors see the report as a sign that the Federal Reserve may pause interest rate hikes soon.
The CPI news sparked a positive reaction in the stock market, with futures rising and Treasury yields falling. Investors are optimistic that the Federal Reserve will pause further interest rate hikes.
Ellen Zentner, chief economic strategist at Morgan Stanley, noted, “The CPI today shows that inflation is starting to ease. This makes it less likely that the Fed will raise rates again soon.”
Mixed Signals in the Inflation Report
While the CPI data today shows progress, some sectors still face rising costs:
Used Cars and Insurance: Prices for used cars increased by 1.2% in December, while car insurance went up by 0.4% for the month and 11.3% annually.
Egg Prices: Eggs became 3.2% more expensive in December, adding to a 36.8% annual increase.
Economist Sung Won Sohn commented, “The CPI data release today highlights progress in controlling inflation, but stubborn price increases in food, gas, and housing remain challenging.”
What’s Next for the Federal Reserve?
The Federal Reserve is expected to hold interest rates steady at its next meeting later this month. Futures markets predict potential rate cuts later in 2025 if inflation continues to decline.
The Fed relies on the personal consumption expenditures (PCE) price index for inflation forecasts, but the CPI report today is a key factor in their decision-making. December’s PCE inflation rate is expected to show similar signs of slowing.