Could a Fed cut in March be off the table?
The US inflation rate rose in December, with a spike in housing costs contributing to an uptick that has dampened expectations of imminent interest rate cuts by the Federal Reserve.
Bureau of Labor Statistics figures released on Thursday (January 11) showed that the consumer price index (CPI) was up 3.4% last month as shelter, electricity and motor-vehicle insurance costs increases all jumped.
Excluding food and energy costs, the CPI was up by 0.3% in December compared with the previous month, while the core measure – economists’ preferred inflation gauge – increased by 3.9%.
While market expectations had solidified toward a March rate cut by the Fed amid growing signs that the economy and labor market are cooling substantially, Thursday’s figures show that there is still plenty to do before inflation returns to 2%, the Fed’s target level.
A rise in shelter prices, which increased by 0.5% in December, was partly spurred by higher hotel prices after a dip in November. Core goods prices, which do not take food and energy commodities into account, saw little change with used-car prices posting an unexpected uptick.
The Fed is set to reveal its first interest rate decision of the year on January 30-31, with the central bank currently expected to keep rates on pause as it continues to assess how the economy performs in the opening months of 2024.
