Consumer price growth accelerated slightly in December, capping a year of plunging inflation, according to data released Thursday by the Labor Department.
The Consumer Price Index (CPI), which is closely watched as an indicator of inflation, rose by 0.3% in the final month of 2023 and by 3.4% over the past year.
Although both the monthly and annual inflation rates exceeded economists' expectations, 2023 ended with a much lower rate of price growth than the previous year. Experts said the numbers still put the U.S. economy on track for lower inflation without a recession, even if the Federal Reserve maintains its expected rate cuts.
“There's nothing in the report that would cause the Fed to rush to cut rates. But it hasn't been that hot, so hopes for a soft landing remain intact,” said Alexandra of Goldman Sachs Asset Management. Wilson Elizondo said.
According to the Labor Department, the annual inflation rate in 2023 will be much lower than the 6.5% rate of inflation in 2022. Inflation is still above the Fed's 2% target, but well below its peak of 9.1% in June 2022, the highest level in 40 years.
Much of December's rise in inflation was driven by home prices, which rose 6.2% in 2023, according to the Labor Department. Shelter costs account for about two-thirds of CPI and have soared as a persistent housing shortage collides with the Fed's rapid rate hikes.
Apartment rents have also risen steadily over the past two years, and there are signs that they will reach a plateau towards the end of 2023. Food costs also rose in December, rising by 0.2%, mainly thanks to higher prices for eggs and meat.
Updated at 8:52 a.m. ET
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