Price pressures eased in December, but the Federal Reserve is still expected to hit pause on rate cuts this month

Underlying inflation in the US eased for the first time in six months in December, although the latest reading likely does little to shift expectations of a Federal Reserve pause on rate cuts at the end of this month.
Government data released Wednesday showed the core consumer price index (CPI), which does not include energy and food costs, was up by 0.2% on a month-over-month basis and 3.2% compared with the same time in 2023.
The headline measure – which takes volatile food and energy price growth into consideration – ticked 0.4% higher over November, driven mainly by a spike in energy costs.
Hopes for further Fed cuts to start 2025 have been scaled back thanks to stickier-than-expected inflation in recent months and continuing signals of a robust labor market. US employers added 256,000 jobs last month, shattering economists’ expectations as the unemployment rate also slid by more than anticipated, to 4.1%.
The US economy added 256,000 jobs in December, prompting expectations that the Federal Reserve will pause interest rate changes in January, with fewer rate cuts expected in 2025, according to Odeta Kushi of First American. https://t.co/W30DlAnKNk
— Mortgage Professional America Magazine (@MPAMagazineUS) January 15, 2025
Markets view a first Fed cut later in the year as a likelier prospect although much will depend on how the economy fares under incoming president Donald Trump, who will retake office next week on a policy platform that many economists fear could stoke inflationary pressures.
Shelter prices increased by 0.3% in December, replicating their growth the previous month, with owners’ equivalent and primary residence rents increasing. Food prices, new and used cars, auto insurance, medical cares and airfares also accounted for significant growth in the overall CPI.
The Federal Open Market Committee (FOMC) is scheduled to meet for the first time this year on January 28-29 for its opening rate announcement under the new administration, with decisions in March, May, and June making up the rest of its schedule for the first half of 2025.
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