»Inflation dropped to 6.5% in December compared to the same month a year ago«
New inflation figures will be released on Thursday.
New inflation figures will be released on Thursday at 01:42.
Inflation slowed in December, marking the weakest annual gain since October 2021, as announced by the Labor Department on Thursday.
The Consumer Price Index increased at a 6.5% annual rate, as predicted by economists.
The increase in core prices, which exclude energy and food, was 5.7% from the previous year.
Between November and December, prices decreased by 0.1%, as lower costs for gasoline, energy services, and other commodities offset increases in the cost of food, housing, and cooking gas.
Brian Coulton, chief economist at Fitch Ratings, stated in an email, “Inflation is heading in the right direction but is still far too high for the Fed to take much comfort from this print,”
Cheaper goods, more expensive services
The supply-chain snarls that fueled inflation last year have largely dissipated, which has slowed price hikes for commodities such as vehicles, furniture, and clothing. The price of items has decreased for three consecutive months. However, inflation in services, such as travel and entertainment, is becoming an important statistic, as some economists fear it will be more difficult to control.
“Services inflation is 7%, and this is not just a story about rental inflation — which keeps jumping in leaps and bounds,” added Coulton. Chairman of the Federal Reserve Jerome Powell has identified services excluding rents as a critical aggregate to monitor, and this trend shows no signs of abating.
Last year, the Federal Reserve raised its main interest rate seven times, bringing it to a range of 4.25 percent to 4.50 percent. Raising interest rates reduces inflation by increasing the price of goods, which has contributed to bringing price increases from a summer peak to their current level.
While the 6.5% annual inflation rate is the lowest in almost a year, it is still about three times the Fed’s target of 2%. Wall Street anticipates that the Fed will raise interest rates multiple times this year, albeit in smaller increments than in 2018.
Kathy Bostjancic, chief economist at Nationwide, stated in a note, “Coming in line with expectations, the ongoing slowing in inflation provides the Federal Reserve room and reason to pare the size of its policy rate increases,” The annual rate of headline and core inflation is substantially over the Fed’s target of 2%, indicating that the Fed will continue to tighten monetary policy.
decreasing anticipation
Americans’ expectation that price hikes will reduce over the next few years is a further indicator that the Fed’s anti-inflation initiatives are succeeding. This is significant because so-called “inflation expectations” can be self-fulfilling: if individuals anticipate that prices will continue to rise substantially, they will often adopt actions, such as demanding higher wages, that can sustain high inflation.
The Federal Reserve Bank of New York said on Monday that consumers anticipate 5% inflation over the next year. This is the lowest expected of its kind in over 18 months. Inflation is projected to average 2.4% over the next five years, just above the Fed’s 2% target.
»Inflation dropped to 6.5% in December compared to the same month a year ago«