December data raises inflation to 2.9% in 2024
This is the third consecutive month it has increased, ending a year marked by rising CPI prices, partly due to energy costs.
Jerome Powell, chairman of the Federal Reserve.
The consumer price index (CPI) rose for the third consecutive month in the United States, according to official figures released Wednesday.
The CPI, a measure of inflation, surged to 2.9% in the 12 months ended December, up slightly from 2.7% in November, the Department of Labor said. The result is in line with what some economists had estimated.
The explanation for the increase is largely due to a jump in energy prices.
The Federal Reserve, the U.S. central bank, has cut its interest rates by 1 percentage point since September and is watching the labor market and inflation closely. Its two goals are to achieve full employment and control rising prices.
The recent pickup in rising prices raises the expectation that it will hold interest rates at current levels at its end-of-month policy meeting.
The good news for the Fed is that annual core inflation, which excludes volatile food and energy prices, came in at a lower-than-expected, at 3.2%, last month, a slight decline from November.
"This pullback in core inflation is a relief, even if it remains well above the Fed's 2% target," noted Jochen Stanzl, an analyst at CMC Markets, in a note.
For this analyst, the data strengthens the market's view that the Fed will not make too many rate cuts in 2025, "especially since the labor market situation does not raise concerns."
"Today's inflation data confirms that the Fed is right to be cautious with its monetary policy," he added in a note to clients.
The Fed cut benchmark interest rates at its last three meetings. Lowering rates means making credit cheaper and thereby freeing up consumption and investment, which fuels the economy's dynamics.
With the labor market strong, the need for further cuts in a context of rebounding inflation is reduced.
The market is pointing to the Fed pausing its cuts, especially to prevent the economy from crashing.
Futures traders give a 97% chance that the Fed will hold rates in the 4.25-4.50% range at its Jan. 28-29 meeting.
Wall Street opens higher following inflation data
The New York Stock Exchange opened sharply higher on Wednesday, upbeat following inflation data and good results from the financial sector.
In early trading, the Dow Jones gained 1.37%, the tech-heavy Nasdaq 1.77% and the broader S&P 500 index 1.43%.
The consumer price index (CPI) rose for the third straight month in the United States, according to official figures released Wednesday that were in line with expectations.
The CPI, a measure of inflation, rose to 2.9% in the 12 months ended December, up slightly from 2.7% in November, the Labor Department said. The result is in line with expectations of economists polled by Dow Jones Newswires and The Wall Street Journal.
The better news is that annual core inflation, which excludes volatile food and energy prices, came in at a lower-than-expected 3.2% last month, a slight decline from November.
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