U.S. inflation eased in December for the sixth straight month following a mid-2022 peak as the Federal Reserve aggressively raised interest rates and the economy showed signs of cooling.
The consumer price index rose 6.5% last month from a year earlier, down from 7.1% in November and well below a 9.1% peak in June, according to reporting in The Wall Street Journal (subscription required).
Core CPI, which excludes volatile energy and food prices, climbed 5.7% in December from a year earlier, easing from a 6% gain in November. Many economists see increases in core CPI as a better signal of future inflation than overall CPI. Core prices increased at a 3.1% annualized rate in the three months ended in December, the slowest pace in more than a year and down from 7.9% in June.
The figures are likely to keep the Federal Reserve on track to reduce interest-rate increases to a quarter-percentage point at their meeting that concludes Feb. 1, down from a half-percentage point increase in December.
U.S. stocks edged higher Thursday, and investors bought U.S. Treasury bonds, lifting bond prices and weighing on yields.
Easing inflation follows several signs that the U.S. economy slowed in late 2022. U.S. imports and exports fell in November from October, while retail sales, manufacturing output and home sales all declined. Job and wage growth slowed in December, though the labor market remained tight with historically low claims for unemployment insurance at the start of the year.
Bill Adams, chief economist at Comerica Bank, said consumers are getting relief from lower gasoline prices and moderating food prices, as well as declining prices for other goods.
On a monthly basis, CPI fell 0.1% in December, due to sharply falling energy prices. That compared with a gain of 0.1% in November and 0.4% in October. Food-price increases also slowed last month. Core CPI rose 0.3% in December, up from November’s 0.2% rise but down from 0.6% increases in August and September.
Goods prices, a key driver of inflation, fell for the third straight month in December as prices fell for products such as automobiles, computers and sporting goods.
Improving supply chains and reduced demand have relieved price pressures on goods, but prices for services continued to climb in part because of wage gains in a tight labor market.
Some economists worry that still-high wage growth could keep consumers flush with cash and companies eager to raise prices to compensate, holding inflation above the Fed’s 2% target.
Shelter prices rose 7.5% in December from a year earlier, the Labor Department said, and a broader measure of services prices that excludes utilities rose 7% during the same period. Both increases were the biggest since 1982.
