U.S. inflation ticks higher in December. What that means for the Fed
Higher energy and housing prices boosted overall U.S. inflation in December, a sign that the Federal Reserve’s drive to slow inflation to its two per cent target will likely remain a bumpy one.
Thursday’s report from the Labor Department showed that overall prices rose 0.3 per cent from November and 3.4 per cent from 12 months earlier. Those gains exceeded the previous 0.1% monthly rise and the 3.1% annual inflation in November. The December figures came in slightly above economists’ forecasts.
Housing costs accounted for more than half the increase in prices from November to December. Energy costs, led by electricity and gasoline, along with food prices, also contributed to the increase.
Excluding volatile food and energy costs, though, so-called core prices rose just 0.3 per cent month over month, unchanged from November’s increase. Core prices were up 3.9 per cent from a year earlier — the mildest such pace since May 2021 and down from November’s 4 per cent year-over year gain. Economists pay particular attention to core prices because, by excluding costs that typically jump around from month to month, they are seen as a better guide to the likely path of inflation.
Overall inflation has cooled more or less steadily since hitting a four-decade high of 9.1 per cent in mid-2022. Still, the persistence of still-elevated inflation helps explain why, despite steady economic growth, low unemployment and healthy hiring, polls show many Americans are dissatisfied with the economy.
That disconnect, which will likely be an issue in the 2024 elections, has puzzled economists and political analysts. A key factor is the public’s exasperation with higher prices. Though the inflation rate has been falling more or less steadily for a
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