US consumer prices rose for third straight month to 2.9% in December

WASHINGTON – US consumer prices increased slightly more than expected in December amid higher costs for energy goods, pointing to still elevated inflation that aligns with the Federal Reserve’s projection for fewer interest rate cuts this year.

The consumer price index (CPI) rose 0.4 per cent in December after climbing 0.3 per cent in November, the Labour Department’s Bureau of Labour Statistics said on Jan 15. In the 12 months through December, the CPI was up 2.9 per cent after rising 2.7 per cent in November. It rose 0.2 per cent in October.

Economists polled by Reuters had forecast the CPI gaining 0.3 per cent and rising 2.9 per cent year on year.

Progress in bringing inflation back to the US central bank’s 2 per cent target hit a snag in the second half of 2024.

A resilient economy, the threat of broad tariffs on imports and mass deportations of undocumented immigrants – actions that are deemed inflationary – also led the Fed to project a shallower rate-cut path this year.

President-elect Donald Trump’s incoming administration has also pledged tax cuts, which would juice up the economy.

Consumers’ inflation expectations soared in January, with households concerned that tariffs would raise prices of goods.

Excluding the volatile food and energy components, the CPI increased 0.2 per cent in December. The so-called core CPI had risen 0.3 per cent for four straight months. In the 12 months through December, the so-called core CPI increased 3.2 per cent after climbing 3.3 per cent in November.

No rate cut is expected at the Fed’s Jan 28-29 policy meeting. While economists see fewer rate cuts this year, they are divided on whether the central bank will reduce borrowing costs again before the second half of the year.

Goldman Sachs expects two rate cuts in 2025, in June and December, revised down from three. Bank of America Securities believes the Fed’s easing cycle is over.

The central bank launched its easing cycle in September and has lowered its benchmark overnight interest rate by 100 basis points to the current 4.50 per cent to 4.75 per cent range.

The last reduction was in December, when policymakers also projected two rate cuts in 2025 instead of the four they had forecast in September 2024. The policy rate was hiked by 5.25 percentage points between March 2022 and July 2023. REUTERS

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