In the big picture, today’s #CPI data displays continued slow progress toward a lower y-o-y rate of #inflation, having come down from a cycle peak of 8.9% in June 2022 to the 6.4% reading today, at the headline level, which is the lowest 12-month inflation gain since Oct 2021.
That is clearly encouraging, and in a lot better place than we had become used to in the Fall, which was at the center of the disappointment for the @federalreserve. However, like bridges during periods of traffic, progress can come with some slowing along the way.
For three straight months we saw essentially flat readings for #CoreInflation (ex-shelter), for an average level of 0.08%, yet this month we saw it move up to 0.2%.
Again, we have seen tangible progress on #inflation, but like traversing bridges during heavy traffic periods in an effort to get to the other side, there is a tangible slowdown in that progress today.
More specifically, turning to the data, #coreCPI (excluding volatile food and #energy components) came in at 0.41% month-over-month and rose 5.58% year-over-year.
Meanwhile, #headlineCPI data printed 0.52% month-over-month and came in at 6.41% year-over-year, with declines in used cars, medical care and airline fares aiding this result. Still, both #shelter and energy indexes rose meaningfully on the month.
Additionally, the #Fed’s favored measure of inflation, #corePCE, increased 0.3% in December, bringing the year-over-year figure for the measure to 4.9%, as of that month.
And another measure that’s worth looking at, the @DallasFed’s trimmed mean measure of PCE #inflation, printed at 4.4% year-over-year in December.
What is concerning, and influential for the #Fed, is that services #inflation continues to remain elevated with limited progress the past few months, and shelter costs leading the way.
The #Fed has presumably recognized that the stickiness of #services inflation is at least partially, if not very much, related to a continued strong #labor environment.
The next few months should again display some more progress on #inflation, but it could be a slow and painstaking process from here.
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