U.S. inflation rises 0.3% in December, pushing annual rate to 3.4%

investing.com:

Investing.com -- Headline U.S. inflation accelerated in December, while an annual underlying reading slowed marginally, as Federal Reserve officials search for signs of easing price gains before rolling out possible interest rate cuts this year.

The seasonally-adjusted year-on-year consumer price index (CPI) in the world's largest economy sped up to 3.4% last month, up from 3.1% in November, according to data from the Bureau of Labor Statistics on Thursday. Month-on-month, the pace increased to 0.3%, driven by increased shelter and energy costs. Economists had seen the figures at 3.2% and 0.2%, respectively.

Meanwhile, the rate of the so-called "core" measure, which strips out volatile items like food and energy, ticked down to 3.9% annually from 4.0% in the prior month. On a monthly basis, core CPI matched November's mark of 0.3%. The core numbers, which are perceived to be a more accurate gauge of the stickiness of price trends than their overall counterparts, were estimated at 3.8% and 0.3%.

In a note to clients, analysts at Evercore ISI argued that, while headline CPI was «modestly higher than expected,» the cooling of inflation is continuing «as most leading indicators [...] are soft.»

Fed policymakers will likely be closely watching the data, which could factor into how they approach rate reductions later in 2024. In a speech on Wednesday, New York Fed President John Williams argued it is still too soon to call for cuts because inflation is well above the bank's stated 2% target.

Williams' comments echoed recent sentiments from other rate-setters, who have moved to temper soaring market enthusiasm for potential reductions early this year. This optimism, fueled by a surprisingly dovish Fed outlook last month, drove