US inflation rose 2.9% in December, exceeding market expectations and fueling concerns about the Federal Reserve’s rate-cut plans. Energy prices drove the increase, accounting for over 40% of the rise. Egg prices surged by 36% due to a bird flu outbreak, while other items saw less-than-expected price hikes.
Despite this, core inflation – which strips out volatile food and energy prices – rose only 3.2% from December 2023, lower than anticipated. Economists view this metric as a better indicator of underlying trends. Market relief was evident in share prices surging and bond yields falling in early trading, with experts saying the latest figures should ease anxiety about a second inflation wave.
Inflation has decreased significantly since 2022, when it peaked at 9%. Investors had expected the Federal Reserve to cut interest rates this year, but doubts remain due to stronger-than-expected job creation figures and plans by President-elect Donald Trump for tariffs and tax cuts. The Fed is likely to maintain its key rate of 4.3% at its upcoming meeting.
However, some experts say that today’s data keeps hopes alive for further rate cuts. Tina Adatia, head of fixed income at Goldman Sachs Asset Management, stated that inflation must cool more before the Fed can cut rates, but the latest figures strengthen the case that the central bank’s cutting cycle is not yet complete.
Source: https://www.bbc.com/news/articles/c2egxwyr2z4o