Gasoline prices were the main contributor to the rise in inflation in December. (iStock)
According to the Consumer Price Index (CPI), the annual inflation rate rose to 2.9% in December, slightly higher than the previous month's annual inflation rate of 2.7%. Published by the Bureau of Labor Statistics (BLS).
The inflation rate in December rose 0.4% from the previous month, slightly higher than expected. Core CPI, which excludes food and energy, rose 0.2% in December, weaker than expected after four consecutive months of 0.3% increases. This resulted in a year-on-year increase of 3.2%.
Energy costs rose 2.6% and were the largest contributor to the monthly increase in December, accounting for nearly 40% of the monthly increase for all items. Gasoline prices rose 4.4% in the same month. Food prices continued to rise, rising 0.3% last month after rising 0.4% in November.
“December's CPI report brings a lot of news, including some glimmers of optimism,” Sam Williamson, senior economist at First American, said in a statement. “Although the overall CPI rose and exceeded expectations, the monthly rate of increase in core CPI, which is less volatile and attracts attention, slowed down and was lower than expected.
“The forecast for a downturn in core CPI is reassuring, but trends don't form in one month,” Williamson continued. “The Fed will need to assess sustained progress before considering rate cuts.”
The Fed cut interest rates by a quarter of a point in December, bringing the rate from 4.25% to 4.5%; Minutes from the Federal Open Market Committee The meeting showed growing concerns about rising inflation and clear disagreement among Fed members on whether to continue lowering interest rates. Minutes of the meeting showed that some expressed support for the central bank to keep its key policy rate unchanged, while most officials said the decision to cut rates was a close call. The Fed's next meeting will be held on January 28th and 29th.
“December's CPI data shows that inflation has not cooled enough to meet the Fed's goals,” said Ryan Marshall, CEO of Boxster Analytics. “As a result, those who were optimistic that the Fed would cut rates further in 2025 are now revising their expectations to expect fewer cuts this year.”
If you're struggling with high inflation, you might consider taking out a personal loan to pay off your debt at a lower interest rate and reduce your monthly payments. Visit Credible to find the interest rate that's right for you without affecting your credit score.
Biden to cancel more student loans with one week left in term
Shelter costs continue to rise
Daniel Hale, chief economist at Realtor.com, said shelter costs rose 0.3% month-over-month, the same pace as last month, pushing annual inflation to 4.6% from 4.7% last month. He helped bring it down to %.
Despite the modest progress, shelter costs remain above pre-pandemic ranges (3.3% on average), Hale said. Rising costs are likely to stall further rate cuts, impacting the level of long-term interest rates such as mortgage rates, which remain just below 7%.
“Currently, the market does not have high odds for a rate cut before June,” Hale said in a statement. “The labor market ended 2024 on a high note as hiring accelerated and the unemployment rate fell to 4.1% in December, with half of the Fed's dual mandate at full employment and three to six months earlier. The Fed is likely to become patient, especially if inflation remains slightly above target. ”
If you're looking to buy a home, consider visiting Credible to find the best mortgage rate for your financial situation.
FHFA Announces Mortgage Loan Limit Increases in 2025
Housing outlook shaky
Higher mortgage rates will further stall the housing market despite eager buyers, Hale said. Homeownership remains a central goal for about 75% of Americans Research by Realtor.comHowever, affordability remains the biggest concern for many.
“Although existing home sales have improved in recent months as mortgage rates fell in the fall, expectations for home sales have subsided as interest rates have risen again,” Hale said.
Regarding mortgage interest rates, the future housing situation is expected to remain largely the same, and housing prices are expected to continue rising. One bright spot is that the next president donald trump The administration could promote more substantial economic growth, which would increase incomes and give Americans more purchasing power. Additionally, the report says that even if incomes do not rise, lower household tax rates are expected to increase household disposable income. Realtor.com housing forecasts.
“Realtor.com's housing forecast predicts a gradual decline in mortgage rates into 2025 to foster a modest increase in home sales,” Hale said. “Every time inflation falls, that expectation will move closer to reality.”
If you think you're ready to consider a mortgage, Credible makes it easy to compare interest rates from multiple lenders in minutes.
Seniors could receive a moderate cost-of-living increase next year in their Social Security payments
Have a finance-related question but don't know who to ask? Email it to your trusted money expert. Moneyexpert@credible.com Your questions may be answered in Credible's Money Expert column.
