Inflation pressures ease in December as core CPI rises less than forecast

New data from the Bureau of Labor Statistics out Wednesday showed that a key inflation metric eased for the first time since July.

On a "core" basis, which strips out the more volatile costs of food and gas, the December Consumer Price Index (CPI) climbed 0.2% over the prior month, a deceleration from November's 0.3% monthly gain. On an annual basis, prices rose 3.2%.

Prior to December's print, core CPI had been stuck at a 3.3% annual gain for the past four months. It was the first time since July that year-over-year core CPI saw a deceleration in price growth.

The print is the latest economic data that the Federal Reserve will consider before its next interest rate decision later this month.

Headline consumer prices rose as forecast in December. The CPI increased 2.9% over the prior year in December, an uptick from November's 2.7% annual gain in prices. The yearly increase matched economist expectations.

The index rose 0.4% over the previous month, ahead of the 0.3% increase seen in November and also on par with economists' estimates.

Seasonal factors like higher fuel costs and continued stickiness in food inflation kept the headline figures elevated.

US Federal Reserve Chairman Jerome Powell gestures as he speaks at a press conference after the Monetary Policy Committee meeting in Washington, DC, on December 18, 2024. The US Federal Reserve cut interest rates by a quarter point December 18 and signaled a slower pace of cuts ahead, amid uncertainty about inflation and US President-elect Donald Trump's economic plans. (Photo by ANDREW CABALLERO-REYNOLDS / AFP via Getty Images) · ANDREW CABALLERO-REYNOLDS via Getty Images

Core inflation has remained stubbornly elevated due to higher costs for shelter and services like insurance and medical care. Used car prices also saw another strong uptick for the third consecutive month, rising 1.2% in December after a 2% monthly gain in November.

Although inflation has been slowing, it has remained above the Federal Reserve's 2% target on an annual basis.

The election of Donald Trump as the nation's next president has further complicated the outlook, with some economists arguing the US could face another inflation resurgence if Trump follows through with his key campaign promises. The president-elect will be sworn into office next week.

Trump's proposed policies, such as high tariffs on imported goods, tax cuts for corporations, and curbs on immigration, are seen as inflationary. And those policies could further complicate the central bank's path forward for interest rates.

Stock futures rose immediately following the report with the 10-year treasury yield (^TNX) inching up 3 basis points to trade above 4.7%.

Notable callouts from the inflation print include the shelter index, which rose 4.6% on an unadjusted, annual basis, slightly lower than November's 4.7% uptick and the smallest 12-month increase since January 2022. The index rose 0.3% over the prior month, matching November.