The core Consumer Price Index (CPI), which excludes volatile food and energy costs, rose 0.2% in December and 2.6% over the past year, slightly below expectations and marking one of the lowest annual readings in several years. Meanwhile, headline inflation held steady at 2.6% annually, in line with forecasts and suggesting that price pressures are gradually easing but still above the Federal Reserve’s 2% target.
The latest CPI report reflected mixed forces across the economy. Shelter costs, the single largest component of overall inflation, rose 0.4% in December, while food prices climbed about 0.7% for the month. Energy prices edged higher, although gasoline prices slipped, and some durable goods like used cars and trucks saw price declines. Other areas, including airfares, recreation, and medical care, recorded notable increases, highlighting that inflation remains uneven across sectors.
Investors responded calmly to the data, with stock futures moving up slightly and Treasury yields dipping, as markets priced in the likelihood that the Federal Reserve will keep interest rates unchanged in the near term. The softness in core inflation adds to the view that price growth is moderating, though persistent costs in key categories may keep the Fed cautious about cutting rates too soon.
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