Food prices rose in December, contributing to higher overall inflation. (iStock)
The paper said consumer prices rose more than expected in December due to the continued rise in shelter prices. consumer price index (CPI) Published by the Bureau of Labor Statistics (BLS).
On an annualized basis, prices rose 3.4% in December, up from 3.1% the previous month and faster than economists expected. Core inflation, which excludes more volatile food and energy prices, rose 0.3%, the same as in November. On an annual basis, core CPI slowed less than expected at 3.9%.
Shelter costs continued to weigh on inflation, contributing more than half of the monthly increase. Rising prices for gas, electricity and groceries also pushed up consumer spending in December. Gasoline prices rose 0.2% after falling 6% in November. Food prices rose 0.1% over the month, while non-home food prices rose 0.3%.
The report was released last Friday following news that economic growth added 216,000 jobs in November and also increased annual wage growth.
The numbers have raised concerns that the Federal Reserve could delay its plans to begin tapering interest rates. At its December meeting, the central bank Announcement of third interest rate suspensionAs a result, the federal funds rate was left unchanged at 5.25% to 5.5%, the highest level in 22 years. But Fed officials have signaled they may start cutting rates later this year, with interest rates expected to fall to 4.6%. Latest economic forecasts This was revealed in the central bank's Summary of Economic Projections (SEP).
“Monthly increases in prices for food, housing, and core services rose at a pace similar to that recorded in November, while energy and core commodity prices have so far exerted downward pressure on top-line inflation. However, it remained relatively flat,” Kayla Brune said. said a senior economist at decision information firm Morning Consult in a statement. “Morning Consult data shows that consumer demand for a variety of products will increase in the second half of 2023, potentially providing price support to these categories.
“Much of the inflation slowdown to date has been tied to goods, and a reversal of the downward trend could create new hurdles for the Fed to reach its 2% inflation target,” Bruun continued.
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Mortgage interest rates may have fallen too quickly
Market expectations were that the Fed would begin lowering interest rates as early as its March meeting. Daniel Hale, chief economist at Realtor.com, said better-than-expected economic data doesn't take rate cuts off the table, but it will likely delay them further.
“For the housing market, this means that the significant decline in mortgage rates observed since October may have exceeded the data,” Hale said in a statement.
Mortgage rates have already stabilized after falling steadily from late October to mid-December. Hale said a more meaningful rate cut would depend on how quickly the Fed changes its policy, and depending on today's CPI numbers, rates could rise again.
Shelter costs are expected to continue to fall, potentially driving more moderate inflation in coming months, but shelter costs will need to rise by around 3.5% for inflation to consistently reach target. would need to go down to
“Market rental asking prices have fallen for the first time in seven months, and the rental market is forecast to be even weaker in 2024 as needed supply is completed and available, and shelter inflation slows further. , we expect overall price growth to slow further in the coming months,'' Hale said.
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Americans are more confident about their finances
Americans are more confident about their finances, according to WalletHub's latest economic report. index. The index, which measures consumer confidence in their financial outlook, rose 15% between December 2022 and December 2023. Consumers' six-month optimism about their financial outlook has reached its highest level since December 2020, according to the survey.
According to the survey, the percentage of consumers who expected their debt to decrease in the next six months increased by 4.4% in December 2023 compared to last year. Additionally, consumer confidence in reducing debt over the next six months has reached its highest level since December 2020.
“The 15% rise in consumer confidence over the past year is an encouraging sign that our economy is recovering from the damage sustained as a result of the pandemic and inflation,” said WalletHub analyst Cassandra Happe. Stated. She says, “People with high financial confidence are more likely to spend more money and take out less debt, both of which are good for the economy as a whole.”
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