CPI Report Live Updates: Annual inflation eased to 6.5% in December




Excluding +5.7%

Food and energy

+5.7%

except

Food and

Energy

+5.7%

except

Food and

Energy

Inflation continued to slow on a year-over-year basis in December, providing welcome relief to American households and a positive development for policymakers at the Federal Reserve and the White House.

The consumer price index rose 6.5 percent in the year to last month, down from November’s reading of 7.1 percent, as prices eased slightly on a monthly basis. The annual inflation rate was the slowest since October 2021 Gas prices are down And airfares have dropped.

Economists and central bank officials are focusing more on the so-called core inflation measure, which strips out food and fuel prices to get a sense of underlying price trends. That measure rose 5.7 percent from a year earlier in December, compared with 6.0 percent earlier and in line with forecasters’ expectations.

Inflation has started to moderate in a meaningful way, helped by developments including affordability Prices Gas pump and low cost airfare. But the key question now is how quickly and fully it will return to normal after an unusually long year and a half, and policymakers are wary that full depreciation could be a long process.

A number of factors should help moderate price increases this year. A rebound in commodity price inflation is expected to help moderate overall inflation this year. Rising rental costs are likely to push up inflation for a while longer, which is expected to reverse by mid-2023. Rents for newly leased apartments have started rising more slowly, which could feed into the government’s official inflation measure over time, according to private data.

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But central bankers are watching closely what happens to prices for other services, including hotel rooms, sporting event tickets and health care. They worry that services inflation — which is unusually fast — could push up prices faster than the central bank’s target. The central bank aims for an average inflation rate of 2 percent, defining that target using a price measure separate from but related to the consumer price index.

Many central bankers think to get Inflation of services Under control, they should slow the job market and reduce wage gains. Otherwise, companies facing large labor bills will continue to pass those costs on to consumers.

“The biggest cost in that sector is labor,” said Fed President Jerome H. Powell said in his latest statement. News conference In December. “Also, we’re seeing a very strong labor market where we’re not seeing much softening, where job growth is very high, where wages are very high.”

To cool the situation, central bankers raise interest rates and make borrowing more expensive for firms and households in an attempt to dampen demand and the broader economy.

There are central bank policy makers Low interest rates increase After a series of rapid moves in 2022, officials have suggested they could slow further in the February 1 rate cut. But until they see concrete evidence that price increases will moderate, officials expect to raise rates at least a little more, even if that means some economic damage.

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