Photo: Xinhua/Liu Jie
WASHINGTON, Jan. 11 (Xinhua) -- U.S. consumer inflation accelerated to 3.4 % in December 2023 from a year earlier after falling to 3.1 % in the previous month due to rising housing and energy prices, the U.S. Labor Department said Thursday. Federal Reserve Governor Michelle Bowman said earlier this week that interest rate hikes are likely over, while noting that "important upside risks to inflation remain".
According to the Labor Department's statistics office, the Consumer Price Index (CPI) rose by 0.3 percent in December on a seasonally adjusted basis after rising by 0.1 percent in November.
The shelter index continued to grow in December, accounting for more than half of the month-on-month growth in all items. The energy index increased by 0.4 % over the month, as increases in the electricity and gasoline index more than offset declines in the natural gas index.
The energy index increased by 0.4 % in December after falling by 2.3 % in November. The gasoline index increased by 0.2 % in December after falling by 6.0 % in the previous month. The electricity index increased by 1.3 per cent during the month.
"The slight increase in headline inflation in December did not derail the overall downward trend in inflation that is still ongoing," Wells Fargo Securities economists Sarah House and Michael Pugliese wrote in an analysis.
The latest inflation report showed that the so-called core consumer price index, which excludes food and energy, rose by 0.3 % in December, the same month-on-month increase as in November.
The shelter index increased by 6.2 % over the past year, accounting for more than two-thirds of the total increase in all items excluding the food and energy index.
However, according to economists at Wells Fargo Securities, core inflation in services "remained somewhat better", with accommodation prices easing only slowly in December and travel-related prices rebounding somewhat from the bottom.
"We expect inflation to slow further during 2024 due to better supply dynamics and more tepid consumer demand," they said. "However, progress is likely to be slower this year, keeping policymakers uncertain about how quickly inflation can return to two percent on a sustained basis."
At a December press conference, Fed Chairman Jerome Powell said the central bank was "making real progress" on inflation, but "we still have a long way to go."
"No one is declaring victory. That would be premature. And we can't guarantee that progress," Powell said. "So we're proceeding cautiously in assessing whether we need to do more or not."
At its last meeting in December, the US Federal Reserve left interest rates unchanged at a 22-year high of 5.25 % to 5.5 % as inflation continues to cool, signaling the end of the rate hike cycle and a possible rate cut in 2024.
Yet several Fed officials have avoided committing to a looser monetary policy in their recent public statements. Federal Reserve Bank of New York President John Williams said on Wednesday that it was too early to call for rate cuts.
"My basic assumption is that the current restrictive monetary policy stance will continue to rebalance and bring inflation back to our longer-term target of 2 %," Williams said in White Plains, New York.
Federal Reserve Governor Michelle Bowman said earlier this week that interest rate hikes are likely over, while noting that "important upside risks to inflation remain."
"Today's slightly worse-than-expected consumer price growth numbers do not provide the Federal Reserve with a reason to change its current policy course of keeping interest rates at current levels," Desmond Lachman, a senior fellow at the American Enterprise Institute, told Xinhua.
Lachman said that while the numbers are consistent with inflation falling toward the Fed's 2 percent inflation target, they are not "low enough" to assure the Fed that inflation may not be stuck at a level above the Fed's desired target.
"The Fed ... will have to wait for further evidence that inflation continues to slow before it considers cutting interest rates," Lachman said.
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