December Inflation - Feeling Hot Hot Hot

Consumer prices rose at the fastest annual pace in nearly 40 years last month, setting the stage for the start of Federal Reserve interest rate increases as soon as March – a dramatic shift from the policy timelines projected as recently as a few months ago.    Looking forward, we believe normalizing demand, tighter policy, and increasingly tough comps can support moderating inflation levels in the first half of 2022.

• Consumer prices (CPI) increased 7.0% year-over-year, in line with forecasts.  In December, the consumer price index (CPI) increased 7.0% compared to the same period a year ago.  Expectations ranged from 6.8% to 7.2% with a median of 7.0%.  Core CPI (excludes food and energy) increased at 5.5% year-over-year.  While price increases were broad-based, Energy costs (+29.3%) and new and used vehicles (+11.8% and +37.3%) were among the larger contributors to the year-over-year increase.
• Consumer prices (CPI) increased 0.5% month-over-month.  In December, consumer prices as measured by CPI increased 0.5% compared to November.  Expectations ranged from 0.2% to 0.6% with a median of 0.4%.  Used car and truck prices (+3.5%) and shelter costs (+0.4%) were among the largest contributors, while energy prices (-0.4%) fell for the first time since April.