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United States Inflation December 2023

United States: Inflation rises in December

Inflation increased to 3.4% in December from November’s 3.1%, overshooting market expectations and the Fed’s 2% target. Looking at the details of the release, prices for food and housing increased at a more moderate pace in December, while prices for transportation grew at a quicker rate.

Annual average inflation fell to 4.1% in December (November: 4.4%). Meanwhile, core inflation fell to 3.9% in December, from November’s 4.0%.

Finally, consumer prices rose 0.30% in December over the previous month, accelerating from the 0.10% rise seen in November.

On the monetary policy implications, TD Economics’ Thomas Feltmate said:

“[The] inflation report is unlikely to alter the FOMC’s near-term policy stance. Although considerable progress on the inflation front has been made over the past year, imbalances in the labor market remain and if left unchecked, threaten to stall the disinflationary process. As a result, Fed officials will likely need to see more compelling evidence that the labor market is cooling, and that inflation remains on a sustained downward path towards 2% before pulling the trigger on rate cuts. This is unlikely to happen until mid-year.”

Desjardins’ Francis Généreux said:

“The December print was a reminder that bringing inflation back down to the Fed target will be tough. Over the next few months, CPI data, especially for services, will have to show even stronger declines for us to be sure that the battle is won. We therefore don’t expect any Fed rate cuts in the first six months of 2024.”

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