Posted on 01/11/24
| News Source: WSJ
Inflation firmed up at year’s end, after the pace of price gains fell by nearly half in 2023.
The consumer-price index climbed 0.3% in December from the prior month and increased 3.4% from a year earlier, the Labor Department said Thursday. That compares with November’s 0.1% monthly gain and marks an acceleration from that month’s 3.1% annual increase.
Core prices, which strip out volatile food and energy items, rose 0.3% in December from the prior month—the same monthly increase as November and slightly faster than would be consistent with the Federal Reserve’s long-term inflation target of 2%. Core prices increased 3.9% from a year earlier, a modest slowing from November’s 4% annual increase.
Overall inflation is well down from 6.5% at the end of 2022, meaning consumers see their dollars go further, though pockets of fast-rising prices remain, such as those for auto insurance and repairs. The rapid cooling of core price increases over the past year has raised hopes of a soft landing, where inflation can be tamed without a surge in unemployment or a recession. Core inflation is often viewed as a better predictor of inflation’s future path than the overall numbers.
“The progress on inflation since June 2022 has been remarkable,” said David Kelly, chief global strategist at J.P. Morgan Asset Management. “The bottom line is that the most likely path for inflation from here is not upwards or sideways but rather down.”
Thursday’s report won’t change Fed officials’ plan to hold their policy rate steady at their next meeting, Jan. 30-31, but some analysts think interest rate cuts could occur after that if monthly inflation readings remain mild.
Inflation is approaching the Fed’s 2% target sooner than economists had expected just a few months ago. In November, an inflation measure the Fed tracks closely, the Commerce Department’s core personal-consumption expenditures price index, slipped to 1.9%, on a six-month annualized basis.