US inflation rose 2.7% in December

• Headline CPI increased 2.7% year-over-year in December, unchanged from November and in line with forecasts
• Core CPI (excluding food and energy) rose 2.6% annually, with monthly gains of 0.3% for headline and 0.2% for core
• Inflation pace has cooled from 3% in January 2024, while tariff impacts have largely been absorbed by companies or passed to consumers

Summary: US Inflation Rose 2.7% in December

US inflation remained stable in December 2024, with the Consumer Price Index (CPI) rising 2.7% year-over-year, matching November's rate and meeting market expectations, according to the Bureau of Labor Statistics' Tuesday report. However, the government shutdown caused some data gaps, reducing the report's clarity.

Key Figures:

• Headline CPI: 2.7% (year-over-year), 0.3% (monthly)
• Core CPI (excluding food and energy): 2.6% (year-over-year), 0.2% (monthly)
• Inflation declined from 3% in January 2024 to 2.7% by year-end

Market Context:

While absolute prices have not decreased, the inflation rate has decelerated throughout 2024, indicating a moderating trend. The report comes amid ongoing concerns about tariff impacts on consumer prices.

Tariff Implications:

The White House has reduced its tariff implementation intensity compared to earlier in the year. Most companies have either passed these tariff costs onto consumers or absorbed the additional expenses themselves, suggesting the initial wave of tariff-related price pressures may have been digested by the market.

Analysis:

The steady 2.7% inflation rate suggests price pressures are stabilizing near the Federal Reserve's preferred range, though still above the 2% target. The core inflation figure of 2.6% is particularly significant for monetary policy decisions, as it strips out volatile components. The data limitations due to the government shutdown may prompt caution in interpreting these figures, but the overall trend indicates continued disinflation without triggering deflationary concerns. This stable reading may influence Federal Reserve interest rate decisions in early 2025.