Kudlow panelists John Carney and Brian Brenberg discuss job growth and the Fed’s moves.
inflation increased Continued high prices continued to weigh on consumers’ financial health ahead of the Federal Reserve’s next decision on interest rates again in December.
The Labor Department said on Wednesday that Consumer Price Index (CPI) — a broad measure of the cost of everyday items like gasoline, groceries and rent — rose 0.4% in December, compared with a 2.9% gain on an annual basis. The 2.9% reading is the highest since July 2024.
The month-on-month reading was slightly warmer than expected among economists surveyed by LSEG, while the annual figure was in line with expectations. The headline figure was up from November’s 2.7% reading, while monthly price growth continued at the same pace as a month earlier.
So-called core prices, which exclude more volatile measures of gasoline and food to better assess price growth trends, were up 0.2% on a monthly basis in December, in line with expectations and down 0.3% the previous month. Core prices rose 3.2% in December from a year earlier, slightly less than expected and down from 3.3% in November.
US producer prices rose modestly in December
The consumer price index (CPI) rose 0.4% on a monthly basis and was up 2.9% in December from a year earlier. (Justin Sullivan/Getty Images/Getty Images)
The report showed that inflation pressures in the US economy remain persistent despite progress made in bringing inflation closer to the Federal Reserve’s 2% target over the past year.
High inflation has created severe financial pressure for most American families, who are forced to pay more for everyday needs like food and rent. Price increases are especially difficult for low-income Americans, because they spend more of their already inflated paychecks on necessities and have less flexibility to save money.
energy expenditure The Bureau of Labor Statistics’ energy index rose 2.6% in December after energy prices showed little change in recent months, accounting for more than 40% of the monthly CPI increase. Gasoline prices increased 4.4% in December.
food prices There was also a 0.3% increase on a monthly basis in December. Both meals at home and meals away from home increased 0.3% last month.
US economy added 256 thousand jobs in December, more than expected
Prices of meat, poultry, fish and eggs were up 0.6% this month and 4.2% from a year earlier. Egg prices rose 3.2% in December and are 36.8% higher than a year earlier as a bird flu outbreak affected production.
accommodation costs There was an increase of 0.3% in December, which is equal to the increase seen in November. The shelter index rose 4.6% from a year earlier, the smallest 12-month increase since January 2022.
Transportation prices rose 0.5% in December and are 7.3% higher than a year earlier. auto insurance prices They were up 0.4% in December and are up 11.3% from a year ago. Motor vehicle repair costs declined 0.6% in December, but increased 7.2% on an annual basis.
Airline fares rose 3.9% in December and are 7.9% higher than a year earlier.
The data comes like this federal Reserve The meeting is scheduled to take place later this month when policymakers will decide whether to cut interest rates or keep them steady with inflation above the central bank’s target.
Fed minutes show policymakers adding to inflation uncertainty from immigration, tariff changes
Federal Reserve Chairman Jerome Powell signaled last month that policymakers may slow the pace of rate cuts in response to the economic data. (Ting Shen/Bloomberg via Getty Images/Getty Images)
Fed Chairman Jerome Powell After policymakers met last month and lowered the benchmark federal funds rate to a range of 4.25% to 4.5%, it indicated that “we are at or near a point where it would be appropriate to slow the pace of further accommodation.” “
The market expects the Fed to keep rates steady at the upcoming meeting and the December CPI print made no change to those expectations, with rates expected to remain at their current levels above 97%, little changed from yesterday and a That’s up from 94.7% the week before. According to the CME FedWatch tool.
“Today’s CPI may help the Fed feel a little more dovish,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “This won’t change expectations of a pause later this month, but it should curb some talk of the Fed potentially raising rates. And judging by the market’s early reaction, investors appear to be feeling relieved after a few months Has stable inflation readings.”
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Stocks rose after the CPI print, with the S&P 500 index rising about 1.3%, while bond yields fell, with the 10-year US Treasury note falling below 3.7%.
“Despite all the noise, inflation is no longer a concern,” said Gregory Daco, EY’s chief economist. “The concern is that elevated prices are restraining consumer spending for many middle-income households and the risk of renewed inflationary pressures from deregulation, immigration restrictions, tariffs and tax cuts in a ‘supply fragile’ environment. “
