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2025-01-15 13:40
Inflation ticked up across the US last month, according to the last report on consumer prices under the Biden administration.
Donald Trump has promised to bring prices down for millions of Americans. But while price rises have slowed sharply since their post-pandemic peak of 9.1%, the pace of inflation remains higher than the Federal Reserve’s target rate of 2% per annum.
The consumer price index (CPI) rose at an annual rate of 2.9% in December, up from 2.7% the previous month, and in line with expectations, according to official data. On a month-to-month basis, the index rose 0.4%.
The closely watched “core” index, which strips out volatile food and energy prices, rose 3.2% in December – down slightly from its annual rate of 3.3% in November, and less than expected. This reading appeared to reassure investors, with the S&P 500 rising 1.4% as Wall Street opened for trading on Wednesday.
On the campaign trail, the incoming president pledged repeatedly to bring down the prices of goods, including groceries, which have risen significantly in recent years. Since winning the election, however, he has acknowledged that doing so will be very hard.
The latest CPI reading, released days before the Biden administration hands over the White House to Trump and his officials, underlines just how hard it will be for them to make good on pledges to ease the cost of living.
Prices are not only still rising; they increased at a higher rate in December than they did in November, and inflation remains above the 2% level targeted by policymakers at the Federal Reserve.
Vehicle prices and air fares increased, in what Samuel Tombs, chief US economist at Pantheon Macroeconomics, described as “temporary” momentum that somewhat skewed the headline figures. “Both the 0.5% increase in new vehicle prices and the 1.2% increase in used-auto prices likely reflect strong replacement demand following large hurricanes,” he said. “In addition, a busy holiday travel season was responsible for December’s 3.9% increase in airline fares.
“This also is a volatile component, which says little about the trend in overall inflation. The core CPI would have increased by just 0.13%, if prices for vehicles and airline travel had been unchanged.”
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