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Consumer prices rose more than expected Investors continue to look for signs that the Federal Reserve could start cutting interest rates, expected in December.
December consumer price index (CPI) showed prices This was a slight increase of 0.3% from last month and an increase from 0.2% in November. Prices were up 3.4% year-over-year and higher than the previous year. This was an increase of 3.1% compared to the previous month.
Economists had expected prices to rise 0.2% month-over-month and 3.2% year-over-year, according to Bloomberg data.
Excluding the volatile food and energy categories, “core” inflation was at an annualized rate of 3.9%, down from 4.0% last month. Economists surveyed by Bloomberg had expected core inflation to be 3.8%. On a monthly basis, the core inflation rate was 0.3%, unchanged from the previous month.
“This is consistent with our view that future disinflation will be moderate, along with the persistence of services inflation,” Ellen Zentner, Morgan Stanley’s chief U.S. economist, said in a note to clients on Thursday. said.
Notable inflation statistics include the shelter index, which increased by 6.2% on an annual basis and contributed to more than half of the price increase.
On a monthly basis, the index rose 0.4%, flat from November’s change.
Amid core inflation, rental prices continued to rise. The rent index and the owner-equivalent rent index each increased by 0.5% from the previous month, marking the third consecutive month of increases. Owner’s equivalent rent is the hypothetical rent that a homeowner would pay for the same home.
Other indexes that rose in December included auto insurance, which rose 20.3% year over year, the biggest increase since 1976, according to Bloomberg.
read more: How to get the best car insurance discounts
Monthly prices of used cars, which have been falling in recent months, rose 0.1%.
The December food index increased by 2.7% compared to last year, and food prices increased by 0.1% from November to December. The eating-at-home index fell by 0.1% after rising in the past few months.
Egg prices increased significantly by 8.9% month-on-month after rising 2.2% in November.
Among the indicators that fell during the month were indicators related to home furnishings and business and personal care, according to the BLS.
This printout is important for investors who have increasingly priced in the possibility of a soft landing (inflation retreating to 2% without an economic downturn) since the last CPI report. Such an outcome could mean the central bank’s interest rate hike campaign ends and it begins to cut interest rates, lowering borrowing costs for businesses and consumers.
As of Thursday morning, the market was pricing in a roughly 69% chance that the Fed would cut interest rates in March, unchanged from the previous day’s odds, according to the CME FedWatch tool.
“I don’t think just delaying the rate cut will be enough,” Bank of America U.S. economist Stephen Juneau told Yahoo Finance Live. “We’re looking for a march cut that’s like a kick in the cut cycle. This is something that leaves the door open, never slams the door shut.”
Markets are aggressively pricing in rate cuts as the outlook for inflation weakens, but Fed officials are taking a more cautious view.
Fed Governor Michelle Bowman said Monday that the Fed may eventually have to cut rates if inflation falls further, but “we’re not there yet.”
read more: Impact of the Fed’s interest rate hike suspension on bank accounts, CDs, loans, and credit cards
Atlanta Fed President Rafael Bostic expressed similar sentiments in separate remarks Monday.
“We have a restrictive stance and I’m happy with that. I hope that that stance will allow the economy to continue to evolve and hopefully keep inflation at the 2% level,” he said. Ta. in response to media coverage of his comments.
Josh Schafer is a reporter for Yahoo Finance.
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