The US Consumer Price Index (CPI) report for December revealed a slowdown in inflation, with core CPI rising just 0.2% and year-on-year core CPI easing to 3.2%. This marks the first monthly decline in core inflation since June.
Key factors driving the slowdown include decreasing energy prices, which rose 2.6% on the month, and gains in shelter costs, airfares, used cars, and trucks. However, the declines in personal care, communication, and alcoholic beverages offset these increases.
The year-on-year core inflation rate has now dropped three times since July, indicating a potential easing of the Fed’s monetary policy stance. Economists believe this news is good for the Federal Reserve, but note that further positive data would be necessary to warrant interest-rate cuts.
Market reactions to the report include rallies in Treasuries and stock futures, while the dollar tumbled. Ten-year Treasury yields fell 13 basis points, reaching 4.66%, and S&P 500 contracts rose 1.4%.
Source: https://www.bloomberg.com/news/live-blog/2025-01-15/us-cpi-report-for-december