Prices fall 0.1% reflecting slowing inflation

Inflation ended 2022 with a modest decline. Department of Labor reported Thursday.

of consumer price index, which measures the cost of a broad basket of goods and services, fell 0.1% over the month, in line with Dow Jones estimates. This represents the largest month-over-month decline since April 2020. This was because much of the country was on lockdown due to fighting. COVID.

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Despite the decline, headline CPI was up 6.5% from a year ago, highlighting the continuing strain that rising costs of living are placing on US household budgets. However, this was the smallest annual increase since October 2021.

Excluding volatile food and energy prices, what we call core CPI rose 0.3%, which also lived up to expectations. Core is lining up again with a 5.7% year-over-year increase.

A sharp drop in gasoline accounted for most of the monthly decline. The price of the pump is down 9.4% over the month, and after surging above $5 a gallon in mid-2022, it’s now down 1.5% from a year ago.

Fuel oil fell 16.6% over the month, contributing to a total 4.5% decline in the energy index.

Food prices rose 0.3% in December, while shelter prices rose 0.8% over the month, up 7.5% from a year ago. Shelters account for about one-third of the total CPI index.

Used car prices, which are also a key early driver of inflation, fell 2.5% month-on-month and are now down 8.8% year-on-year. Medical services rose 0.1% after falling for two consecutive months, while apparel prices rose 0.5% and transport services rose 0.2%, up 14.6% from a year ago. However, while airfares fell 3.1% over the month, they are still up 28.5% from a year ago.

the market reacted little Following the news, equities have opened slightly lower and Treasury yields have also fallen for most of the duration.

Both annual growth rates are well above the Federal Reserve’s 2% target, but are consistently low.

“Inflation is easing rapidly. “Except for the top line numbers, the report has nothing but good news. 6.5% is too high.”

The CPI is the most watched inflation gauge because it takes into account the cost of everything from a gallon of gasoline to a dozen eggs and an airline ticket.

The Federal Reserve prefers another measure of adjusting for changes in consumer behavior. However, central banks incorporate a wide range of information when measuring inflation, and CPI is part of the puzzle.

We had some data that showed consumers were changing their behavior. Accordingly, it should be noted that December’s decline was largely supported by lower gas prices that may not be sustainable given market dynamics and consumer demand.

Simona Mokta, chief economist at State Street Global Advisors, said: “We know we won’t get the same support from gas prices, so we don’t expect the next report to be as good. “But the trend is good.”

Markets are watching the Fed closely as officials battle inflation to a 41-year high. supply chain bottlenecks, war in ukraineand trillions of fiscal and monetary stimulus have contributed to price spikes across most sectors of the economy.

Policymakers are weighing how far they need to go with rate hikes used to slow the economy and keep inflation in check. So far, the Fed has raised its benchmark borrowing rate by 4.25 percentage points to its highest level in 15 years. Officials say the rate is likely to exceed 5% before taking a step back to see the impact of the tightening policy.

Following the consumer price index report, market pricing indicated a growing likelihood that the Fed would approve a 0.25% rate hike on February 1st. That means the central bank has taken another step back after approving his 0.75% rate hike for the fourth consecutive year last year. The increase slowed to 0.5 points in December. Prices fall 0.1% reflecting slowing inflation

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