Inflation eased substantially for a third month in December as tumbling gasoline prices and a moderating rise in grocery bills offset another surge in rent.
Consumer prices increased 6.5% from a year earlier, down from 7.1% in November and a 40-year high of 9.1% in June, according to the Labor Department’s consumer price index..
That marks the slowest annual gain since October 2021 and matches economists’ estimates.
On a monthly basis, consumer prices fell 0.1%, the first monthdecline since May 2020.
What does core CPI mean?
Core prices, which exclude volatile food and energy items and better reflect longer-term trends, increased 0.3% from November following a 0.2% bump the previous month. That lowered the annual increase from 6% to 5.7%.
This is a developing story.
Generally, prices for goods such as used cars and furniture have been falling or stabilizing as COVID-19-induced supply chain troubles have improved and demand has ebbed. But prices for services have marched higher as more Americans return to traveling and other activities even as lingering worker shortages push up wages.
Federal Reserve Chair Jerome Powell says the Fed won’t feel confident that inflation is sustainably slowing — allowing it to pause its aggressive interest rate hikes — until pay increases in service industries throttle back.
Still, the central bank is moving more cautiously. Markets expect the Fed to dial back to a quarter point rate rate increase early next month after a half-point hike in December.
And inflation is projected to ease dramatically in 2023. Barclays expects annual price increases to reach 2.6% by the end of the year, modestly above the Fed’s 2% target.
Why are gas prices falling so fast?
In December, gas prices declined for the fifth time in six months amid growing worries about a global recession and lower oil demand. Pump prices slid 9.4%. Nationally, regular unleaded gasoline averaged $3.27 a gallon Wednesday, down from about $5 in June, according to AAA.
“That is helping,” Cheryl Stewart, of Perry Hall, Maryland, said of the recent decline. “It definitely frees up the money for something else.”
Stewart says the savings have allowed her to resume her morning ritual of stopping for a coffee at Dunkin Donuts or Starbucks on her way to work.
But she says grocery prices are still too high. “I’m in major shock when I see the price of a dozen eggs at more than $4,” Stewart says.
So she has stopped buying eggs and chicken wings, whose price also has soared.
To better cope with high food costs, Stewart, a public relations manager at a university, took on part-time freelance work 15 hours a week, allowing her and her family to travel more.
Why are the food prices going up?
Grocery prices are still ratcheting higher but more slowly, rising by 0.2% from November and 11.8% over the past year. The cost of commodities such as wheat and corn have fallen in recent months on easing global demand.
