Bumpy Inflation Ticked Up in December

Higher rents and food prices boosted overall US inflation in December, a sign that the Federal Reserve's drive to slow inflation to its 2% target will likely remain a bumpy one, per the AP.

• The numbers: Thursday's report from the Labor Department showed that overall prices rose 0.3% from November and 3.4% from 12 months earlier. Those gains exceeded the previous 0.1% monthly rise and the 3.1% annual inflation in November, and were above what economists had forecast, per the New York Times.
• Core prices: Excluding volatile food and energy costs, though, so-called core prices rose just 0.3% month over month, unchanged from November's increase. Core prices were up 3.9% from a year earlier, down a tick from November's 4% year-over year gain. It's the first time the index has been under 4% since May 2021. Economists pay particular attention to core prices because, by excluding costs that typically jump around from month to month, they are seen as a better guide to the likely path of inflation.

• Context: Overall inflation has cooled more or less steadily since hitting a four-decade high of 9.1% in mid-2022. Still, the persistence of still-elevated inflation helps explain why, despite steady economic growth, low unemployment, and healthy hiring, polls show many Americans are dissatisfied with the economy—a likely key issue in the 2024 elections. The Fed wants to reduce year-over-year inflation to its 2% target level.
• Markets: Stock futures edged lower after the report came out, notes CNBC. Investors generally fear higher inflation will prompt the Fed to return to hiking rates, though that is not expected to happen at upcoming meeting late this month, per the Wall Street Journal.

(More inflation stories.)