Inflation was faster than in December, marking the 33rd consecutive month of annual price increases well above the Fed's healthy 2% target.
The Consumer Price Index, the Labor Department's broad measure of how much consumers pay for goods and services, rose 3.4 points in December from a year earlier.
Economists had expected a 3.2% increase from the previous year. The 12-month rate of increase in November was 3.1%.
Compared to the previous month, the CPI rose 0.3%, accelerating from November's 0.2% rise and exceeding expectations for a 0.2% rise.
Consumer inflation reached a recent peak of 9.2% in June 2022, but the Biden administration is under pressure from lawmakers worried about the Federal Reserve raising interest rates at a record pace and unusually large budget deficits. It has since retreated as spending has been curbed.
The Labor Department said increases in housing costs accounted for more than half of the monthly increase. The energy index rose 0.4% in the month due to higher electricity and gasoline prices.
Food prices rose again in December. Food prices rose 0.1%, and eating out prices rose 0.3%.
Core prices, which exclude food and energy prices, rose 0.3%, beating analysts' expectations of 0.2%. Compared to a year ago, core prices are up 3.9%, lower than the 4% 12-month increase recorded in November but higher than the 3.8% expected.
Markets are pricing in the US Federal Reserve (Fed) cutting interest rates as early as March. However, rising inflation could force the Fed to hold off on cutting rates. The Fed is already facing intense scrutiny over the timing of its rate cuts in an election year, with inflation still well above its 2% target. Former President Trump said in an interview with Breitbart News that he believes the Fed will cut interest rates to aid President Biden's re-election efforts.
