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United States Inflation December 2022

United States: Inflation falls to lowest level since October 2021 in December

Inflation came in at 6.5% in December, which was down from Novembers 7.1% and matched market expectations. December’s result represented the weakest inflation rate since October 2021. The decline was driven by moderating price pressures for transportation, energy and food.

Annual average inflation ticked down to 8.0% in December (November: 8.1%). Meanwhile, core inflation fell to 5.7% in December, from Novembers 6.0%.

Lastly, consumer prices fell 0.08% in December over the previous month, swinging from November’s 0.10% rise. December’s result marked the weakest reading since April 2020.

On the reading and implications for monetary policy, TD Economics Thomas Feltmate said:

“Goods prices have turned quickly in recent months and have been a key factor in why core inflation has recently cooled. However, at just over 25% of the core CPI basket, weaker goods prices alone can only get inflation down to somewhere in the 3%-4% range. The rest of the heavy lifting will need to come from weaker price growth for services, and this is unlikely to happen so long as wage growth continues to run at a near 5% pace. […] We suspect today’s reading on inflation supports a smaller 25bps hike [at the Feds February meeting], as the FOMC now tries to gauge the cumulative impact of all the tightening done to date.”

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