Last week, the U.S. Bureau of Labor Statistics released December’s Consumer Price Index (CPI) report, a key measure of inflation that captured the attention of markets and policymakers alike. While inflation remains above the Federal Reserve’s target, there were some encouraging signs within the numbers, offering hope for continued progress in taming rising prices.
The headline CPI rose 0.4% in December, bringing the twelve-month rate to 2.9%. While this is slightly higher than November’s annual figure of 2.7% and above the Fed's 2% target, the main driver of the increase was energy prices, which surged 2.6% during the month. Stripping away the more volatile categories of energy and food, the “core” CPI showed a milder increase of 0.2% in December. On an annual basis, core inflation eased slightly to 3.2%, down from 3.3% in November. This marked the smallest monthly gain in core CPI since July, signaling that the Federal Reserve's interest rate hikes may be having the intended effect of cooling inflationary pressures.
Markets responded favorably to this report, as the modest decline in core CPI's annual rate suggested that inflation might be on a sustainable downward trend. While challenges remain—particularly in energy markets—the signs of moderation in core inflation offer a cautiously optimistic outlook for the economy as we move into 2025.
At Stonecrop Wealth Advisors, we understand how economic shifts, like inflation, may influence your financial plans. Whether navigating market volatility or identifying opportunities in changing conditions, we are here to guide you with thoughtful strategies and tailored advice. Contact us at info@stonecropadvisors.com to learn how we may help you stay on course toward your financial goals.
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