Consumer Prices Continue Slow Rise In December

The latest Consumer Price Index (CPI) reading indicates headline inflation rose slightly in December, exceeding expectations and affirming a rate-cut trend line that the Federal Reserve laid out at its last meeting in December.

“The December CPI numbers indicate that inflation is not cooling at the rate that satisfies the Fed’s target,” commented Ryan Marshall, CEO of the real estate technology firm, Voxtur Analytics. “As a result, those who were optimistic that the Fed would cut interest rates more in 2025 are now realigning forecasts to expect fewer rate cuts this year.”

Inflation fears have returned to the forefront of economists’ minds in recent weeks after last month’s employment data beat expectations by a mile.

Today’s Labor Department figures show prices climbed 2.9% on an annual basis in December after increasing 2.7% in November. On a monthly basis, inflation rose 0.4% last month after climbing 0.3% in November.

These increases were mostly driven by rising energy costs, which accounted for 40% of the rise across the all-items index.

Core inflation, which eliminates the more volatile costs of food and energy, showed inflation climbing only 0.2% over the prior month, a deceleration from November’s 0.3% monthly gain.

“This downside surprise in Core CPI is encouraging, but one month does not make a trend. The Federal Reserve will likely need to see sustained progress before considering any rate cuts,” commented Sam Williamson, senior economist at First American.