A customer selects goods at a supermarket in San Mateo, California, the United States, Nov. 29, 2023. (Photo by Li Jianguo/Xinhua)
Federal Reserve Governor Michelle Bowman said earlier this week that interest rate hikes are likely over, while noting that "important upside inflation risks remain."
WASHINGTON, Jan. 11 (Xinhua) -- U.S. consumer inflation in December 2023 accelerated to 3.4 percent from a year ago, after dropping to 3.1 percent in the previous month, amid rising shelter and energy prices, the U.S. Labor Department reported Thursday.
The Consumer Price Index (CPI) increased 0.3 percent in December on a seasonally adjusted basis, after rising 0.1 percent in November, according to the department's Bureau of Labor Statistics.
The index for shelter continued to rise in December, contributing over half of the monthly all-items increase. The energy index rose 0.4 percent over the month as increases in the electricity index and the gasoline index more than offset a decrease in the natural gas index.
The energy index rose 0.4 percent in December, after decreasing 2.3 percent in November. The gasoline index increased 0.2 percent in December, following a 6.0 percent decrease in the previous month. The index for electricity increased 1.3 percent over the month.
"The modest pickup in headline inflation in December does not derail the overall downward trend in inflation still underway," Sarah House and Michael Pugliese, economists with Wells Fargo Securities, wrote in an analysis.
The latest inflation report showed that the so-called core CPI, which excludes food and energy, edged up 0.3 percent in December, the same monthly increase as November.
A customer visits a supermarket in San Mateo, California, the United States, Dec. 12, 2023. (Photo by Li Jianguo/Xinhua)
The shelter index increased 6.2 percent over the last year, accounting for over two thirds of the total increase in all items less food and energy index.
Core services inflation, however, "has remained somewhat stickier," with shelter prices easing only slowly and travel-related prices rebounding somewhat in December, according to the economists with Wells Fargo Securities.
"We look for inflation to slow further over 2024 amid improved supply dynamics and more tepid demand from consumers," they said. "However, progress is likely to be slower-going this year and keep policymakers uneasy about how quickly inflation can return to 2 percent on a sustained basis."
At a press conference in December, Fed Chair Jerome Powell said that the central bank is "making real progress" on inflation, but "we still have a way to go."
"No one is declaring victory. That would be premature. And we can't be guaranteed of this progress," Powell said. "So, we're moving carefully in making that assessment of whether we need to do more or not."
On the latest policy meeting in December, the U.S. Federal Reserve left interest rates unchanged at a 22-year high of 5.25 percent to 5.5 percent as inflation continued to cool, signaling an end to its rate hiking cycle and possible rate cuts in 2024.
U.S. Federal Reserve Chair Jerome Powell attends a press conference in Washington, D.C., the United States, on Dec. 13, 2023. (Xinhua/Liu Jie)
Despite that, several Fed officials have avoided committing to looser monetary policy in their recent public statements.
Federal Reserve Bank of New York President John Williams said Wednesday that it's still too soon to call for rate cuts.
"My base case is that the current restrictive stance of monetary policy will continue to restore balance and bring inflation back to our 2 percent longer-run goal," Williams said in White Plains, New York.
Federal Reserve Governor Michelle Bowman said earlier this week that interest rate hikes are likely over, while noting that "important upside inflation risks remain."
"Today's slightly worse than expected consumer price inflation numbers provide no reason for the Federal Reserve to change its present policy course of keeping interest rates on hold at their present level," Desmond Lachman, a senior fellow at the American Enterprise Institute, told Xinhua.
Lachman said while the numbers are consistent with inflation coming down towards the Fed's 2 percent inflation target, they were "not sufficiently low" to assure the Fed that inflation might not get stuck at a level above the Fed's desired target.
"The Fed … will need to await further evidence that inflation is continuing to decelerate before it contemplates cutting interest rates," Lachman said. ■