December’s inflation report showed a modest slowdown, but the big problem is it excludes basic expenses like food and energy that hit families the hardest.
Key Facts:
• The core consumer price index (CPI), which excludes food and energy, rose just 0.2% in December, marking its first dip in six months.
• The headline CPI, including all costs, climbed 0.4%, with more than 40% of that increase coming from energy.
• Cheaper hotel rooms, smaller jumps in medical care services, and restrained rent growth helped lower the core figure.
• Under President Joe Biden, consumer prices rose a combined 20%, and economists believe incoming President Donald Trump’s tariffs may drive inflation higher.
• Most analysts still predict the Federal Reserve will leave interest rates unchanged this month, with some suggesting a cut could happen as early as March.
The Rest of The Story:
Although core inflation came in lower than expected, critics point out that focusing on a number without food and energy hides the true costs faced by everyday Americans.
Many families continue to feel pressure from grocery bills and fuel expenses, which do not factor into the core measure.
So regardless of the hype inflation has not eased as we can see every time we step into a grocery store.
The bond market welcomed the softer reading, but Federal Reserve officials remain cautious.
They prefer to see a series of weaker inflation reports, especially given ongoing worries about wage growth and a strong labor market.
The Fed’s next meeting is set for later this month, with more attention now shifting to what Trump’s policies might bring.
Commentary:
Despite a slightly lower core figure, inflation is still a concern.
The immediate likelihood is that the Fed will keep rates unchanged, watching for longer-term inflation trends rather than pivoting on one month’s data.
Looking ahead, investors want to see if Trump’s actions on tariffs and global trade might lift prices further.
The Bottom Line:
While December’s core CPI may look calmer, ignoring food and energy can paint a misleading picture for households.
The Fed seems set to hold rates steady, with an eye on how the new administration’s plans could affect everyday costs.