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»Consumer prices increased by 6.5% in December as the Fed considers its next rate hike«
Inflation fell to a new low in January, strengthening Wall Street investors’ optimism that the Federal Reserve will pause its interest rate hikes, which have shaken the US economy.
The December reading of the Consumer Price Index, a widely monitored indicator of the cost of common goods and services, revealed a 6.5% increase in prices compared to the same month the previous year.
According to the Bureau of Labor Statistics’ most recent report, released on Thursday, prices decreased 0.1% from November to December.
Core inflation, which includes volatile food and energy prices, increased by 5.7% annually.
The data matched the predictions of Wall Street. Prior to the release of the December CPI report, experts predicted that headline inflation would increase 6.5% compared to the prior year, while core inflation would increase 5.7%.
Inflation has declined in recent months after reaching a multi-decade high of 9.1% in June. Americans continue to pay unreasonably high prices for necessities such as groceries and housing.
Fed Chair Jerome Powell has indicated that additional interest rate hikes are forthcoming.
In addition, inflation remains far above the Fed’s 2% objective.
Before suspending interest rate hikes, Fed Chair Jerome Powell and other central bank regulators have emphasized the need for convincing indications that inflation has slowed.
The Fed’s target rate is likely to remain in restrictive territory for some time, as evidenced by the likelihood of more rate hikes in 2023. Last year, the central bank executed seven straight rate hikes.
Multiple Fed officials have adopted a hawkish stance prior to the release of the most recent inflation figures.
President of the Atlanta Fed Raphael Bostic, a nonvoting member of the Federal Open Market Committee’s rate-setting committee, stated that he favors hiking the benchmark rate over 5%, from its current range of 4.25% to 4.50%.
Separately, Richmond Fed President Thomas Barkin signaled further rises by stating, “there is still work to be done” to return prices to normal levels.
During a lecture in Sweden earlier this week, Powell did not indicate the magnitude of the next rate increase.
Powell stated, “Price stability is the foundation of a healthy economy and provides the public with immeasurable long-term benefits.” “However, restoring price stability when inflation is high may necessitate unpopular measures in the short term, as we raise interest rates to slow the economy.”
In the days leading up to the announcement of the December CPI report, stocks rose consistently, indicating that the market anticipated a positive outcome.
Investors have fretted for months that the Fed could overdo its efforts to curb inflation, triggering a devastating recession in the United States.
At the completion of their next two-day meeting on February 1, Fed officials will reveal the newest decision regarding the benchmark interest rate.
»Consumer prices increased by 6.5% in December as the Fed considers its next rate hike«