Consumer price data released Thursday showed Federal Reserve officials, the White House and American households that inflation continued to slow at the end of 2023, capping a year in which the price increases bedeviling families and policymakers cooled in earnest.
Prices overall climbed more quickly in December than November on a yearly basis: 3.4 percent versus 3.1 percent previously, which was more than economists in a Bloomberg survey had forecast.
But after stripping out volatile food and fuel prices to get a sense of the underlying inflation trend, a “core” price measure climbed 3.9 percent in the year through December, down from 4 percent previously. That marked the first time the core index has dropped below 4 percent since May of 2021.
The data underscores that while inflation remains faster than usual — and month-to-month bumps are still likely as gas prices and other volatile costs fluctuate — the measure is making progress back toward a normal pace. That is likely to come as welcome news to central bankers and President Biden after nearly three years of rapid price increases that have pushed up costs for consumers and strained many household budgets.
“We’ve seen how the data can be bumpy,” said Gregory Daco, chief economist at EY-Parthenon. “The important dynamic is really at the core level, and what we’re seeing at the core level on a three or even six-month basis is really encouraging.”
Some of the underlying details could keep Fed officials wary as they look ahead to 2024. A slowdown in rent for new leases is trickling through the broader housing market only gradually. And while some goods and service costs are cooling notably, price tags on products like vehicle insurance continue to increase fairly steeply.
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