December Inflation - Encouraging Print

In December, consumer prices as measured by CPI, rose 2.9% compared to a year ago, up from 2.7% in November and in line with expectations.  Core CPI (excludes volatile food and energy prices) rose 3.2%, slightly lower than the 3.3% reported in November and 0.1% lower than anticipated.  While price pressures have subsided from the pandemic-era peak of 9.1%, progress appears to have leveled off more recently.  This, coupled with evidence that the labor market remains on solid footing should support an argument for a more gradual pace of interest rate cuts going forward.  Fed policymakers cut rates 0.50% in September and 0.25% in November and December of last year.  Investors are pricing in a single 0.25% cut for 2025, expected to take place in the latter half of the year.

• Consumer prices (CPI) increased 2.9% year-over-year.  In December, the consumer price index (CPI) increased 2.9% – in line with expectations but up from 2.7% in November and 2.6% in October.  The increase was primarily driven by low base effects from last year, primarily for energy. Additionally, inflation accelerated for food (+2.5%) and transportation (+7.3%) but slowed for shelter (4.6%) and used cars and trucks (-0.4%).  We continue to keep a close eye on shelter costs, which represent nearly one third of the consumer price index and tend to impact the index with a lag.  At +4.6% year-over-year, shelter inflation decelerated from +4.7% in November, down from a peak of 8.2% in March 2023.  Core CPI (excludes food and energy) increased 3.2% year-over-year, beating 3.3% from November and slightly better than expectations.
• Consumer prices (CPI) increased 0.4% month-over-month.  In December, consumer prices rose 0.4% compared to November.  This increase is the most since March and above forecasts of 0.3%. The energy index rose 2.6%, accounting for over 40% of the monthly increase. Both food prices and shelter costs edged higher by 0.3% month-over-month.  Core CPI (excludes food and energy) increased 0.2% month-over-month, after increasing by 0.3% in each of the previous four months.