In a key economic development, the annual consumer inflation rate in the United States rose to 2.9% in December, according to the latest data released by the inflation. This marks an increase from November’s rate of 2.7% and reflects heightened pressure on household budgets as prices for key goods and services continue to climb.
Consumers’ inflation expectations surged in January, with households expressing concerns that tariffs could drive up the cost of goods. The Consumer Price Index (CPI), excluding the often-volatile food and energy categories, rose by 0.2% in December. This core CPI had previously seen consistent monthly increases of 0.3% over the last four months. On an annual basis, the core CPI climbed 3.2% in December, slightly lower than November’s 3.3% rise.
The Federal Reserve is not expected to implement a rate cut during its upcoming Jan. 28-29 policy meeting. While economists generally predict fewer rate cuts this year, opinions differ on whether the central bank will reduce borrowing costs again before the second half of the year.
Goldman Sachs forecasts two rate cuts in 2025, slated for June and December—a downward revision from an earlier projection of three cuts. Meanwhile, Bank of America Securities suggests the Fed’s easing cycle has come to an end.
The central bank initiated its current easing cycle in September, lowering its benchmark overnight interest rate by a total of 100 basis points to the current range of 4.25%-4.50%.
Core inflation, which excludes volatile food and energy prices, rose by 0.2% on a monthly basis and by 2.5% year-over-year. This measure is closely monitored by policymakers as it provides a clearer picture of underlying price trends.
Economists attribute the increase in inflation to a combination of factors, including robust consumer demand, supply chain disruptions, and the lingering effects of pandemic-related economic measures. The Federal Reserve, which has set a long-term inflation target of 2%, is expected to take these figures into account as it considers its monetary policy decisions in the coming months.
In response to the report, financial markets showed mixed reactions. While some investors expressed concerns about the potential for further interest rate hikes, others viewed the data as a sign of a resilient economy.
The rising inflation has fueled debates among lawmakers, businesses, and households alike, with some calling for additional measures to curb price growth while others emphasize the importance of supporting economic recovery.
Looking ahead, analysts suggest that inflationary pressures may persist into 2024, although the pace of increases is expected to moderate as global supply chains stabilize and interest rate policies take effect.
Stay tuned for more updates on this developing story.
