Inflation in December showed a slight cooling, with consumer prices rising 0.3% from the previous month, the same increase recorded in November, according to the Labor Department.
Sources:
pbs.orgweareiowa.comExcluding the volatile food and energy categories, core prices rose 0.2%, also matching November's figure.
Sources:
weareiowa.comsun-sentinel.comThis trend suggests that inflation may be stabilizing, although it remains above the Federal Reserve's target of 2%.Many economists had anticipated a jump in inflation as the government resumed normal data collection following a six-week shutdown last fall.The modest increases that matched the previous month's figures came as a relief to many.
Sources:
pbs.orgwashingtonpost.comThe price of manufactured goods remained flat in December, indicating that the impact of tariffs may be starting to fade.
Sources:
weareiowa.comsun-sentinel.comThe cooling inflation could lead the Federal Reserve to consider reducing its key interest rate later this year, potentially lowering borrowing costs for mortgages, auto loans, and credit cards.
Sources:
pbs.orgweareiowa.comHowever, significant price increases in necessities such as groceries, rent, and utilities have left many American households feeling financially squeezed, turning affordability issues into high-profile political concerns.
pbs.orgwashingtonpost.comDespite the overall cooling, grocery prices rose by 0.7% in December compared to the previous month, indicating that food costs remain elevated.
Sources:
weareiowa.comsun-sentinel.comYear-over-year, food prices increased by 2.4%, a larger rise than seen in 2024 or 2023.
Sources:
pbs.orgwashingtonpost.comPresident Donald Trump, responding to the inflation figures, celebrated the data on social media, claiming "Great (LOW!) Inflation numbers for the USA." He also noted that the economy expanded at a solid pace in the fourth quarter of the previous year.
Sources:
weareiowa.comsun-sentinel.comHowever, John Williams, president of the Federal Reserve Bank of New York, indicated that tariffs have likely contributed to inflation by about half a percentage point.
Sources:
pbs.orgweareiowa.comWilliams expressed optimism about underlying inflation trends, stating that there are no signs of broader inflationary pressures and predicting that inflation will peak in the first half of this year before declining toward the 2% target by 2027.
Sources:
weareiowa.comsun-sentinel.comThe December report is the first clear measure of inflation since September, as the government had suspended the collection of price data during the shutdown.
Sources:
pbs.orgwashingtonpost.comThe figures for October and November were partially distorted due to this disruption, making the December data particularly significant.
Sources:
weareiowa.comsun-sentinel.comDespite the recent cooling, inflation remains significantly lower than the four-decade peak of 9.1% reached in June 2022.However, it has stubbornly hovered around 3% since late 2023.
Sources:
pbs.orgweareiowa.comThe cost of essential items like groceries is about 25% higher than pre-pandemic levels, contributing to widespread dissatisfaction with the economy.
Sources:
weareiowa.comsun-sentinel.comThe Federal Reserve faces a challenging task in balancing its goal of combating inflation while also supporting employment through interest rate adjustments.As long as inflation remains above the 2% target, the Fed is likely to be cautious about further rate cuts.
Sources:
pbs.orgwashingtonpost.comIn December, the Fed reduced its key rate by a quarter-point, but Chair Jerome Powell indicated that the central bank would likely hold off on additional cuts to assess how the economy evolves.
Sources:
weareiowa.comsun-sentinel.comTrump has criticized the Fed for not cutting rates more aggressively, arguing that such actions would lower mortgage rates and reduce government borrowing costs.
Sources:
pbs.orgwashingtonpost.comIn a recent development, the Department of Justice served the Federal Reserve with subpoenas related to Powell's congressional testimony about a $2.5 billion renovation of Fed office buildings, raising concerns about the Fed's independence.
Sources:
weareiowa.comsun-sentinel.comPowell responded to these claims, asserting that they were pretexts for the White House to exert more control over the Fed.
Sources:
pbs.orgwashingtonpost.comAs the economic landscape continues to evolve, the interplay between inflation, interest rates, and political pressures will remain a critical focus for policymakers and the public alike.
