Inflation picked up in December, CPI report shows. What will it mean for Fed rate cuts?
Not so fast.... The latest predictions were for the Federal Reserve to cut interest rates three times in 2024. Maybe people were getting a little to ahead of themselves and things are not quite that certain.
My Summary:
In December, inflation in the United States experienced an uptick, raising concerns about the persistence of high consumer prices which had previously shown signs of decline. This resurgence of inflation, marked by a rise to 3.4% compared to the previous year, contrasts with the stabilization seen in the preceding months. This increase was primarily driven by higher costs of essential living expenses such as rent, food, and gasoline. Additionally, an unexpected rise in used car prices contributed to this trend. The core inflation rate, which excludes volatile food and energy costs, rose slightly to 0.3% for the second consecutive month, bringing the annual increase to 3.9%, the lowest since May 2021. This data suggests a gradual, rather than rapid, decline in inflation, posing challenges for monetary policy and potentially influencing the Federal Reserve's decisions on interest rates.
The overall trajectory of inflation shows a significant slowdown from its peak of 9.1% in June 2022. However, the path to lower inflation has been uneven, with fluctuations in various sectors. While prices for goods have decreased due to the easing of pandemic-related supply chain issues, the cost of services, including rent and auto-related expenses, has continued to rise. This increase in service costs is partly attributed to higher employee wages linked to labor shortages caused by the pandemic. These rising costs have impacted consumer behavior, as evidenced by Amber Gavriluk's decision to reduce dining out due to higher restaurant and food delivery prices. The Federal Reserve's approach to interest rates remains cautious, with indications of rate cuts only if inflation consistently moves towards the Fed's 2% target. This cautious stance is reflected in the diverse trends in price changes, such as slight increases in gasoline prices and a moderate rise in grocery prices, contrasted with significant increases in rent and other service-related costs.
Source:
https://www.usatoday.com/story/money/2024/01/11/consumer-price-index-report-inflation-data-report-december/72183796007/