The core Consumer Price Index (CPI) annual rate recorded a modest decline to 3.2% in December, surpassing economists' forecasts of 3.3%. This drop in the core CPI, which excludes volatile food and energy prices, marks a slight improvement from the previous month. The data, released on Thursday, also showed mixed trends across different sectors, influencing market reactions.
Food prices climbed by 0.3% in December, contributing to an overall annual increase of 2.5% in 2024. Meanwhile, energy prices experienced a minor decrease of 0.5% on an annual basis. However, the monthly CPI increase of 0.4% was propelled by a 2.6% rise in energy prices, largely driven by a 4.4% surge in gasoline costs.
The overall 12-month inflation rate remained steady at 2.9%, aligning with economists' expectations as surveyed by Dow Jones. The monthly CPI increase also slightly exceeded the anticipated 0.3% rise. These figures indicate a nuanced inflationary environment, with certain sectors experiencing significant fluctuations.
Shelter prices, which account for about one-third of the CPI weighting, increased by 0.3% in December and were up 4.6% compared to the same period last year. This persistent rise in shelter costs continues to exert pressure on households and the broader inflation landscape.
Market reactions to the CPI report were immediate and pronounced. Stock market futures surged, reflecting investor optimism regarding the inflation data. Conversely, Treasury yields tumbled, as the decline in core CPI eased concerns over aggressive monetary tightening.