Inflation news is either good or disappointing, depending on how you look at it.
As prices for gas, eggs and used cars increased in December, the consumer price index rose 2.9%, according to statistics reported by the Labor Department this week. That’s the biggest increase since July and represents the third straight hike since September’s inflation rate dropped to 2.4%, a three-year low.
At the same time, the core inflation rate fell to 3.2%, after remaining stuck at 3.3% for three months in a row, leaving economists worried inflation had plateaued above the 2% mark where Federal Reserve officials would like to see it.
According to a report from The Associated Press, those concerns have sent interest rates on Treasury securities higher, which has also pushed up borrowing costs for mortgages, cars, and credit cards, even as the Fed has cut its key rate.
Last Friday’s unexpectedly strong jobs report caused stock and bond prices to fall on fears that a healthy economy could keep inflation elevated, preventing the Fed from cutting further.
Excluding the volatile food and energy categories, economists forecast that so-called core inflation remained at 3.3% in December for the fourth month in a row, the AP reported.
Last week, minutes from the Fed’s December meeting showed that economists at the central bank expect inflation to remain about the same this year as in 2024, pushed up a bit by higher tariffs.
Fed Chair Jerome Powell has said the central bank will keep its key interest rate elevated until inflation is back to 2%. As a result, Wall Street investors expect the Fed to cut its key rate just a single time this year, from its current level of 4.3%, according to futures prices, the AP reported.
