Inflation accelerated more than December, marking the thirty-third consecutive month with annual prices rising significantly faster than the two percent target seen as healthy by the Federal Reserve.
The consumer-price index, the Labor Department’s broad measurement of what consumers pay for goods and services, rose 3.4 in December from a year earlier.
Economists were expecting a year-0ver-year increase of 3.2 percent. The 12-month gain was 3.1 percent in November.
Compared with the prior month, the CPI was up 0.3 percent, an acceleration from the gain of 0.2 percent in November and faster than the 0.2 percent forecast.
Consumer inflation hit its recent peak of 9.2 percent in June of 2022 and has since retreated as the Federal Reserve raised interest rates at a record pace and the Biden administration’s spending was reined in by lawmakers worried about extraordinarily large budget deficits.
The Department of Labor said that increased housing costs contributed over half of the monthly increase. The energy index rose 0.4 percent over the month, driven by higher electricity and gasoline prices.
Food prices rose again in December. Grocery prices rose 0.1 percent while prices for dining out rose 0.3 percent.
Core prices, which exclude food and energy prices, rose 0.3 percent, more than the 0.2 percent forecast by analysts. Compared with a year ago, core prices are up 3.9 percent, which is lower than the 12-month gain of four percent recorded in November but higher than the 3.8 percent forecast.
The market has been pricing in a rate cut from the Federal Reserve as early as March. Rising inflation, however, may force the Fed to hold off on rate cuts. The Fed is already facing scrutiny over the timing of rate cuts during an election year while inflation is still significantly above its two percent target. Former President Trump said in an interview with Breitbart news that he thinks the Fed will cut rates in an effort to help President Biden’s re-election efforts.
