On Tuesday, the Bureau of Labor Statistics released the Consumer Price Index (CPI) for December. It exposed the Federal Reserve’s persistent 2.7% annual inflation target. This was the same story as November—our economy still danced in the liminal space between pandemic and post-pandemic worlds. The CPI is the most important economic indicator that impacts working people. It’s their most essential inflation barometer. Revealing consumers’ experiences with inflation, putting a human face on how it is hurting consumers’ pockets.
For December, the month-over-month inflation rate shot up to 0.3%. That would be a huge jump from the projected average pace of 0.1% that we experienced in November. Economists had expected a monthly CPI increase of 0.3%, so right in line with the actual results. They were expecting a bigger drop, forecasting a decline to 2.6% on the annual CPI.
The Bureau of Labor Statistics has recently released new data illustrating the economic divide in America. These data especially help to paint a picture of the crisis in dense environments such as Manhattan, NYC. Although the inflation rate over the last twelve months remained steady at 3.7%, millions of Americans continued to struggle with persistent affordability issues during 2023. This suggests that while there may be some progress in controlling inflation, the realities of rising prices continue to impact everyday life.
Upon reviewing all these inflation trends, as usual, let’s note that the annual pace of inflation has smoothed to 2.7% on the yo/y Consumer Price Index. The price stability is an encouraging sign that the Federal Reserve’s unprecedented fight against inflation is taking effect. Yet consumers remain worried about their economic wellbeing.
The Consumer Price Index, despite its flaws, will continue to be an important guide for policymakers. It provides key information about trends in consumer spending and the broader state of the economy. It provides a picture of overall trends in what prices are doing that can be used to make smart decisions about monetary policy and economic strategy.