Investing.com - US consumer prices rose in line with expectations in December, while an underlying measure was slower than anticipated, according to a closely-watched gauge of inflation that could play into the Federal Reserve's interest rate policy plans.
The headline consumer price index increased by 0.4% last month, accelerating slightly from 0.3% in November, the Labor Department's Bureau of Labor Statistics said. In the twelve months through December, the CPI climbed by 2.9%, faster than the prior reading of 2.7%.
Meanwhile, the so-called "core" measure, which strips out volatile items like food and fuel, edged up by 0.2% month-on-month and 3.2% year-over-year. Economists had estimated the numbers would match November's pace of 0.3% and 3.3%, respectively.
In the build-up to the report, concerns swirled around nagging inflation, particularly after last week’s blockbuster employment data. President-elect Donald Trump’s vow to impose strict tariffs on allies and adversaries alike have also fueled the worries over lingering price pressures.
US government bond yields have subsequently touched multi-month highs in recent days, weighing on the attractiveness of stocks, as investors dialed back expectations for Fed rate reductions this year. The central bank slashed borrowing costs by a full percentage point in 2024.
However, following the data on Wednesday, traders were pricing in a Fed rate reduction by July, earlier than prior estimates for a drawdown in September, Bloomberg News reported.
Meanwhile, US stock futures also moved higher, while benchmark US 10-year Treasury yields slipped. Yields typically move inversely to prices.
In a note to clients, analysts at Vital Knowledge called the CPI print the "third dovish inflation number in the last 24 hours" following soft US producer prices and an easing UK inflation release. Markets will "celebrate" the return, they said, particularly after solid results from several Wall Street banking giants on Wednesday.
But they flagged that the uncertainty around Trump's trade stance and potential US fiscal imbalances are the main sources of "macro risk right now."