News

Consumer prices increased 0.4% over the month and 2.9% over the year in December, accelerating from the 2.7% over-the-year rise in November. Core CPI, which excludes more volatile energy and food prices, edged down to a 3.2% over-the-year increase and rose 0.2% over the month, which is down from the 0.3% monthly gains from the four prior months.

Shelter rose 0.3% over the month and 4.6% over the year in December, the smallest 12-month increase since January 2022. On the other hand, food price increases are inching back up, rising 0.3% over the month and 2.5% over the year in December. Prices for transportation services climbed 0.5% over the month and 7.3% over the year, with motor vehicle insurance surging 11.3% over the year.

Energy costs soared 2.6% in December, accounting for more than 40% of the monthly increase of the all-items index, but fell 0.5% over the year. Price changes within the energy category varied widely. For example, energy commodity prices are down 3.9% over the year, while utility (piped) gas service prices are up 4.9%.

As the over-the-year headline rate has ticked up in previous months, markets are anticipating that the Federal Open Market Committee will keep rates steady at its meeting next week. As was exhibited in its December Summary of Economic Projections, the FOMC’s expected easing plan of 100 basis points of rate cuts in 2025 was dialed back to 50 bps as the Fed’s progress on inflation slows.